2014 IPO Market: Upcoming J. Crew IPO Could Reach $5 Billion

The 2014 IPO market is cluttered with hot tech offerings, but a clothing retailer might start stealing headlines as rumors pick up of a $5 billion J. Crew Group Inc. IPO.

Earlier this week, Bloomberg reported that J. Crew could be valued as high as $5 billion when it comes to market, citing anonymous sources close to the company. Reportedly, J. Crew has been interviewing numerous banks before making a final decision on an initial public offering.

When J. Crew was purchased by TPG Capital and Leonard Green & Partners LP in 2010, the two companies shelled out $2.64 billion for the retailer. If the $5 billion valuation figure holds, J. Crew will have nearly doubled its value in four years.

J. Crew operates 451 stores around the world and most recently expanded to Hong Kong and London.

The company recently estimated revenue of $2.43 billion in the period from Feb. 1, 2013, to Feb. 1, 2014. That's a year-over-year jump of 9%.

At the same time, J. Crew estimated that its earnings were between $369 million and $371 million before interest, taxes, depreciation, and amortization. That was up from approximately $360 million the previous year.

A J. Crew IPO date is yet to be determined, but those familiar to the situation say the company is eyeing the end of 2014.

And while J. Crew will grab a lot of attention before it comes to market, it won't be the only retail IPO for investors in 2014…

J. Crew IPO Faces Stiff Competition

While they don't operate in exactly the same retail space, initial public offerings from retailers Tory Burch and Marc Jacobs could serve as competition for J. Crew in 2014.

Both Tory Burch and Marc Jacobs offer more high-end items than J. Crew, but because many of the upcoming IPOs of 2014 are from the tech sector, these three fashion magnates will be pitted against each other.

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Tory Burch has only 100 stores worldwide, but still raked in more than $1 billion in revenue in 2013. That was an increase from $800 million in 2012. Tory Burch may lag far behind J. Crew in the number of physical stores, but with shoes and handbags retailing between $300 and $600, it doesn't struggle generating revenue.

Marc Jacobs operates in the same luxury realm as Tory Burch, so it's not necessarily taking customers from the cardigan- and khaki-wearing J. Crew customer base.

All three will be looking to replicate the performance of Michael Kors Holdings (NYSE: KORS) stock, which jumped 20% in its first day of trading and has gained 313% since it first went public in December 2011. It was one of the most successful fashion IPOs in recent memory.

With IPO dates yet to be determined for all three companies, here's what we do know: At the moment, J. Crew is the strongest IPO option, with a high valuation and more than $2.4 billion in revenue.

Things could change quickly, however, as each company begins revving up the hype machine ahead of its public offering.

Would you be interested in investing in a J. Crew IPO? Send us your thoughts on Twitter @moneymorning with #JCrew.

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• Bloomberg:
  J. Crew Said to Be Talking with Banks About 2014 IPO

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