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Hampshire Collects Fashion Profits
New York buyout shop Hampshire Equity Partners appears poised to make a handsome profit from its investment in urban clothing retailer Citi Trends Inc. Savannah, Ga.-based Citi Trends said Thursday, Jan. 26, that it priced its secondary offering of 1.675 million shares of common stock at $42.25 per share. Hampshire Equity Partners, which is selling the bulk of those shares, should receive about $57 million in proceeds, according to a filing with the Securities and Exchange Commission. Citi Trend's stock has soared since it went public at $14 a share in May. The company, which trades on the Nasdaq under the ticker CTRN, opened Thursday at $43.22 a share, before slipping to $42.56 by midmorning. Hampshire pocketed about $14 million selling shares in the IPO plus the redemption of Series A preferred stock it had held. After the secondary offering, Hampshire will continue to own 50% of the company, according to the prospectus. At the current stock price, Hampshire's remaining stake would be worth about $278 million. The IPO prospectus says that existing investors paid an average price of 44 cents per share and it suggests that Hampshire invested only about $4 million of equity for the company's common stock. Including the secondary offering, the firm will have recouped about $75 million from Citi Trends. Hampshire acquired control of the chain, which operates family clothing stores in the Southeast, in 1999 for an undisclosed sum. In fiscal year 2000, the company had sales of $80.9 million and net income of just $1.2 million. Under Hampshire's ownership, revenue rose to $203 million and net income soared to $7.3 million in fiscal year 2004. The urban fashion retailer sells branded and private-label apparel and accessories, focusing mainly on the African-American market. It has grown to 236 stores from 85, expanding into the Mid-Atlantic, Midwest and Texas, and plans to open a further 42 to 45 stores in 2006. In the first nine months of fiscal year 2005 the company saw $6.3 million of net income on $193 million of net sales. It generated between $17 million and $18 million of operating income over the last 12 months, compared with just $2.3 million for the year ended Feb. 3, 2001. And for the 12 months ended Oct. 29, 2005, it logged about $23 million of Ebitda, according to an SEC filing. Citi Trends tapped CIBC World Markets as the sole bookrunner for the offering, while Piper Jaffray & Co., SG Cowen & Co. LLC and Wachovia Securities served as co-managers. The underwriters have a greenshoe option to purchase an additional 251,250 shares of the retailer's common stock.
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