The Container Store (TCS -2.34%) electrified the market with its debut on Friday. The chain specializing in storage containers and other home furnishings hit the market at $17.50 a share, but it wasn't enough.
Despite posting years of losses, investors gravitated to the retailer as a name they know. Consumer-facing companies going public lately have been held in high regard by investors bidding up the stocks once they hit the open market. If The Container Store rocked the market last week, one can only imagine how well Twitter will do if it does go public later this week as planned.
But The Container Store isn't the first retailer to reward the institutional investors and privileged underwriter clients that got in at the IPO price this year. Things have been heating up across other retail areas, too. From sandwiches to boutique supermarkets, let's go over a few chains that went on to double after going public in 2013.
| Company | IPO | Nov. 1, 2013 | Gain |
|---|---|---|---|
| Noodles (NDLS 8.08%) | $18.00 | $43.92 | 144% |
| Sprouts (SFM 0.47%) | $18.00 | $45.34 | 152% |
| Potbelly (PBPB 1.13%) | $14.00 | $26.54 | 90% |
Source: Hoover.
Noodles cashed in on the "fast casual" trend that finds hungry patrons looking for something that is higher quality than fast food but more convenient than table service. Noodles fits the bill with its wide globetrotter menu of noodle-related entrees that are served quickly.
Sprouts Farmers Market went public in August, and the fast-growing chain of supermarkets specializing in organic foodstuffs has been harvesting some pretty bountiful gains. Investors don't seem to mind that it's generating lower revenue per square foot than its two publicly traded rivals. Just as investors have hopped on anything related to 3-D printing, the same thing is happening with organic groceries. If the concept is popular -- and Sprouts' impressive comps bear that out -- investors are going to buy in.
Potbelly is a sandwich shop that has quickly grown to top 300 locations. It went public at $14 last month, and even though it's now trading 90% higher, it was trading as much as 142% higher when it peaked at $33.90 two days after going public.
In short, these are all dynamic growth companies posting double-digit percentage growth, but they aren't the best in their class. Investors already have a publicly traded fast-casual operator that is growing comps at healthier rates than Noodles and Potbelly. There are high-end grocers milking more out of their selling space. But investors are still flocking to the names they know because they can picture the growth trajectory. All four of these retail concepts have room to expand several times over if their execution is tight. None of the names are necessarily cheap. There's a reason underwriters could only get institutional investors to pay less than half as much for these names in recent months and weeks. But with individual investors hungry to bid up stocks with growth stories that are easy to digest, it's easy to see this trend continuing until the bull rally catches a breather.
