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The 3 Best-Performing Consumer Goods IPOs of 2018

By Rich Duprey - Dec 18, 2018 at 6:56AM

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Only a handful of consumer-oriented companies are generating positive returns since going public this year.

There have been nearly 200 initial public offerings (IPOs) in 2018, but only a relative handful have occurred in the consumer goods sector. Instead, the biggest IPO representation -- over 20% of the total -- has been in the technology sector.

Of the 12 consumer goods companies that have gone public this year, only half of them are above their offer price, and a few of them just barely so. Although tech IPOs may be the sexier offerings that get investors talking, let's look at the top performers of this dirty dozen and see why they're doing so well.

Letters IPO on stacks of coins with a rising arrow

Image source: Getty Images.

3. Farfetch (up 19.4%)

Don't tell online fashion marketplace Farfetch ( FTCH -1.57% ) that it's a consumer goods company. Despite offering a platform where retailers gather to sell luxury clothes and accessories, the organization described itself in its prospectus as "a technology company at [our] core" that's simply been built up around retail. In a sense, Farfetch is correct, because you wouldn't consider either Amazon.com or eBay, which it resembles in operation, a retail stock. Farfetch does operate a single bricks-and-mortar boutique, Browns, which it says gives it insight into the retail market.

Farfetch went public in September after pricing its offering at $20 per share. It went on to peak at over $32 but has since tumbled back down closer to its IPO price. Shares are rising again, however, after the company announced it acquired Stadium Goods, an online marketplace for sneakers and sportswear.

  

2. BJ's Warehouse (up 32.9%)

Warehouse club BJ's Warehouse ( BJ 5.01% ) priced its IPO at $17 a share in June, offering 37.5 million shares, and raising $637 million in the process.

BJ's, of course, is no stranger to the public markets, having been publicly traded until private equity firms Leonard Green and CVC Capital Partners took it private in 2011 in a $2.8 billion deal. Now public again, BJ's Warehouse is the third-largest U.S. warehouse club operator by number of locations and revenue behind Walmart's Sam's Club and Costco. Yet it's a slightly different animal than either of its rivals, operating more like a grocery store and carrying many more grocery stock-keeping units (SKUs).

BJ's stock enjoyed an early run-up before collapsing and losing 40% of its value from its peak. It's bounced back some and trades over $22 a share (still well above its offering price). However, while it has expansion opportunities since its warehouses are concentrated mostly in the Northeast, BJ's Warehouse looks like it may continue to struggle against its bigger, better-financed, and more profitable competitors in both the warehouse club space and in the traditional grocery store category.

1. PlayAGS (up 39.8%)

The top-performing consumer goods IPO is PlayAGS ( AGS 4.22% ), which was also one of the first IPOs of 2018, priced its offering in January at $16 a share and raised $10.2 million. The company provides electronic gaming machines (EGMs) to casinos, primarily in the Native American gaming market, where it maintains a 20% share, and it's now ramping up its expansion into other markets including Canada. Revenue in the third quarter of 2018 grew 34% on a 58% rise in the number of EGMs it sold during the period, leading PlayAGS to increase full-year guidance for adjusted earnings before interest, taxes, depreciation, and amortization.

Shares of PlayAGS had moved steadily higher throughout 2018, but began falling in September following a secondary stock offering and a deal with sportsbook and gaming operator GVC Holdings to provide third-party slot content aggregation for real-money wagering. The stock almost hit its offering price before rebounding vigorously on the earnings news.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

BJ's Wholesale Club Holdings, Inc. Stock Quote
BJ's Wholesale Club Holdings, Inc.
BJ
$68.29 (5.01%) $3.26
Farfetch Limited Stock Quote
Farfetch Limited
FTCH
$33.32 (-1.57%) $0.53
PlayAGS, Inc. Stock Quote
PlayAGS, Inc.
AGS
$6.91 (4.22%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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