Trader Talk

Do you believe a serious recession is imminent? The IPO for you may have arrived

A trader works on the trading floor of the New York Stock Exchange in New York, the United States, on May 24, 2023.
Michael Nagle | Xinhua News Agency | Getty Images

Do you believe a serious recession is imminent?  The IPO for you may have arrived.

Savers Value Village, the largest for-profit thrift store operator in the U.S. and Canada, is going public Thursday at the New York Stock Exchange.

That’s right, it’s thrift stores, used stuff. They run 317 thrift stores under various brands in the U.S., Canada and Australia. They buy secondhand clothes, bedding, shoes, accessories, housewares, books and other items from nonprofit thrift stores, or from on-site donations at Community Donation Centers at their stores, and then resell them.

The average price for an individual item sold is  under $5.00.

Thrift is cool

Never thought about the second-hand market? You’d be surprised how big it is. It was estimated at $35 billion in 2021, and is expected to grow to more than $82 billion by 2026.

They claim to have 4.7 million active loyalty program members in the United States and Canada.

Of course, there are a large cadre of traditional thrift shoppers, but there’s a growing cadre of young people who love shopping second-hand.  They just don’t call it “thrift.” They call it “vintage.”

“We are committed to redefining secondhand shopping by providing one-of-a-kind, low-priced merchandise ranging from quality clothing to home goods in an exciting treasure-hunt shopping environment,” the company says in its prospectus.

Naturally, there’s an eco-angle as well

You’ve heard of the massive amount of food that is thrown out in this country?  Wait until you hear about the massive amount of clothes that are thrown out.

“We also believe consumers are increasingly concerned about the environmental impact of the clothes they wear,” the company said.  “There is a growing awareness that the textile and clothing industry is one of the most environmentally damaging sectors of the economy.”

Here’s an interesting line:  “Discarded clothing remains the largest source of textile waste in the world, with the average U.S. citizen throwing away 81 pounds of clothing each year, 95% of which could have been re-worn or repurposed; yet 85% of this material ends up in landfills….Thrift as a business model provides one of the most effective solutions in mitigating the environmental cost of clothing and extending its life.”

There’s even an AI angle

“Data analytics have played a critical role in elevating the quality of our delivered supply by enabling us to concentrate on supply sources with quality goods, which has been a significant driver of our gross product margin,” the company said.

It’s a fairly large IPO

They plan to offer 18.8 million shares at $15-$17. At the midpoint this would raise $301 million, with a fully diluted market value of $2.8 billion.

That is a very respectably sized IPO, and is a sign that IPO market is (slowly) starting to reopen.

And they’re profitable, with $1.437 million of net sales in 2022, $84.7 million of net income and $301.7 million of Adjusted EBITDA.

The IPO for the recession crowd?

You see where I’m going with this.  Yes, Savers Value Village has a compelling story on its own, but for all those who believe in the “imminent serious recession” story, this would seem to be the IPO for them.

Think about it.  If the U.S. goes into a serious recession, what would benefit more than thrift stores?  Dollar General and Walmart are not far enough down the value chain for you as a doomster?  The market for thrift stores would be very strong.

There’s other IPO competition

Two other IPOs that are seeking to raise roughly the same amount of money (about $300 million) are also going public at  the NYSE Thursday to compete for the IPO money.

Kodiak Gas Services, which provides natural gas compression services in the U.S., is seeking to raise $328 million at the midpoint.

Fidelis Insurance, a global provider of specialty insurance and property reinsurance based in Bermuda, is seeking to raise $298 million at the midpoint.

These are both significant players in their space. 

But the thrift story is, well, kind of cool.