We’ve recently done a couple of stories about how “thrift is in fashion when foot inflation is hot” and on Savers Value Village’s (SVV) strong financial and business model. As such, it wasn’t a surprise that SVV’s initial public offering (IPO) was well received by the market. The IPO price was $18.00 per share, but its stock closed at $23.70 after the first day of trading. The majority owner--private equity firm Ares--sold $400M worth of stock in the IPO.
Despite its continued visitation trends (below), we are surprised by how well the IPO has been received. At the current stock price, SVV has an enterprise value (the combined value of the market capitalization of its shares and its net debt) exceeding $5B, which is comparable to Dillard’s and nearly half that of the much larger Macy’s and Kohl’s, both brands that have far more locations and portfolio real estate value (SVV has only 346 leased locations).
Looking at next year’s profit estimates, SVV is expected to generate roughly $250M in EBITDA; in contrast, Macy’s and Kohl’s are expected to generate around $1.9B apiece, or 7X more. SVV is opening new stores with a long-term target of 2,200 locations (versus having a relatively static footprint). But at a rate of 20 new locations per year, that 2,200 target is a long way off.