Trendy retailer Delia’s wants to get in early on another fad – spinning off part of its Internet business.
The company, best known for its catalog of clothes and accessories for teen girls, said yesterday it will offer the public a stake in its Internet operations.
Analysts expect the retailer to raise up to $100 million from the sale of a 20 percent-to-30-percent stake.
Investors seem to agree. Delia’s stock jumped 26 percent on the news-up 31/4 to 153/4.
Company officials declined to comment on the offering, noting that the company hasn’t yet set a date for the offering, or even to file a registration statement with the Securities and Exchange Commission.
However, a source close to the company says the latter should happen within a month.
The move is just latest in Delia’s aggressive expansion. In the last year the popular retailer has established an online store on the Yahoo! website and snapped up boys clothing and home furnishing e-commerce sites.
It’s also broken into the bricks-and-mortar retail business, buying Screeem!, a chain of mall stores.
Company officials were tight-lipped about specifics, citing SEC restrictions on public comments before a stock offering.
Its websites include dELIAS.com, as well as TSIsoccer.com, Droog.com and the gURL.com community website.
Delia’s CFO Evan Guillemin was cautious about the company’s motives for the spinoff.
“As with our Yahoo deal, we think the Internet represents a different but related business opportunity. And to fully take advantage of it we want to put in place the right management and resources,” he said.
Analysts said the offering is a vote of confidence in Delia’s Internet division, which has seen robust sales since it started last year. Analysts expect online revenue to account for about 4 percent, or $6 million, of Delia’s 1998 sales. But they predict it could double this year.
Linda Killian of the Renaissance IPO fund says the web is crucial to retailers like Delia’s, because the cost of doing business over the web is far cheaper than in stores or in catalogs. And she’s confident there’s room in the market for yet another Internet IPO. “I think there’s a lot of appetite for them,” she says, “particularly when you can buy a retailer like Delia’s that has an established reputation and has proved itself to be a very good merchandiser, and has invested a lot in its online infrastructure.
Delia’s won’t be the first retailer to offer the public a stake in its online business. Barnes & Noble is set to spin off BarnesandNoble.com in the next few weeks. And analysts say a lot more retailers are thinking about it, waiting to see how the book retailer fares.
The only possible downside is that the hype over Delia’s web sales has the potential to cannibalize its bread-and-butter catalog business, analysts said.
But a person close to the company laughs off that idea, saying it would be great for Delia’s, because it’s so much cheaper to market over the web than send out catalogs.
The insider added that Delia’s would never consider getting out of the catalog or retail businesses.