During a frenetic week of IPO debuts, Poshmark Inc. and Petco Health and Wellness Inc. are proving that retail’s revival is taking hold.
Poshmark shares skyrocketed 141% on its first day of trading on the Nasdaq under POSH, ending the trading day at an impressive 101.50. The IPO raised $277 million.
Petco, which is using the clever stock symbol WOOF, shot up about 63% to 29.40. The pet purveyor raised $864 million from its IPO launch.
“There is pent-up consumer demand and pent-up investor demand,” said Bryan Eshelman, managing director in the retail practice at AlixPartners, the global consulting firm, in an interview with FN this week.
While Poshmark and Petco might have vastly different propositions — one is a digital native, while the other still has a big brick-and-mortar business — favorable pandemic shifts pushed both companies to go public.
Poshmark was a clear winner during the past year — thanks to a big surge in resale, an area of the market that had been gaining momentum pre pandemic.
In its IPO prospectus, the decade-old Poshmark noted that revenues during the first three quarters of 2020 increased 28% to $192.8 million in the first three quarters of the year. What’s more, it swung to a profit of $20.9 million over the same timeframe, compared with the prior year’s loss of $33.9 million.
But investors are likely eager to snap up the stock because of its future prospects. A report by ThredUp — a rival resale player that is plotting its own IPO — revealed that the online secondhand market is expected to grow 69% between 2019 and 2021, gaining 27% in 2020. The sector is expected to hit $64 billion by 2024 (from $28 billion in 2019).
Petco — which is going public for the second time — needs to raise capital at a time when the business is under pressure. With almost 1,500 stores, the company’s reliance on brick-and-mortar is a warning sign, but it has taken some important steps.
Wellness — for people and pets alike — is driving purchasing decisions for many consumers. So it was a strategic move for the company to add “health and wellness” to its official moniker.
What’s more, investors are banking on the uptick in pet adoptions during the pandemic to be a boon for the company .
Petco, founded in 1965, was acquired by CPP Investments and CVC Capsl Partners in 2015 for almost $5 billion. Petco reported sales of $3.6 billion and net loss of $20.3 million in the quarter ending Oct. 31, 2020.
With retail and fashion IPOS firmly in the spotlight, names to watch in the coming months include cult heritage brand Dr. Martens and luxury e-tailer MyTheresa.