Initial public offerings are feeling the effects of the coronavirus outbreak, too, as jittery investors roil the U.S. markets.
Though Madewell has reportedly been planning an IPO for months, its market debut remains under discussion for the moment.
J. Crew is believed to have commenced on Tuesday its planned Madewell IPO, which has now been extended to the end of April.
Madewell’s parent on Monday said the proposed IPO is dependent on “market and other conditions” and that it continues to pursue strategic alternatives to maximize value.
The delay will allow J. Crew to “thoroughly assess all alternatives, including the separation of J. Crew and Madewell into two independent companies and a potential IPO of Madewell,” Michael J. Nicholson, J. Crew’s president and chief operating officer, said.
But companies also prefer to go public when the markets are on an upswing, but the coronavirus news changes rapidly and it’s difficult to know how investors will react on any given day. Last week, anxieties around the global outbreak of novel coronavirus, now officially identified as COVID-19, caused the Dow Jones Industrial Average to shed more than 3,500 points as investors feared a slowdown in global growth.
Yet, despite an increase in U.S. deaths, the Dow roared back on Monday, jumping 1,290 points. This kind of uncertainty presents challenges for companies that want to proceed with an IPO, not to mention trying to figure out investor appetite on any given day. And that volatility makes it hard for underwriters to want to go ahead with an IPO plan.
J. Crew’s proposed IPO for Madewell isn’t the only brand that’s been impacted by the coronavirus. Footwear firm Cole Haan was planning to begin speaking with potential investors on Monday as it starts the requisite roadshow, but now its IPO plans are reportedly on hold.
Putting an IPO plan on ice certainly isn’t the stated game plan for J. Crew, but how the coronavirus may impact the IPO market will depend on how the disease progresses and its impact on market conditions, as well as whether J. Crew might elect to negotiate for another extension with its bondholders.
J. Crew made the disclosure as it posted fourth quarter results. For the three-month period ended Feb. 1, the company posted net income of $1.5 million, versus a net loss of $74.4 million in the year-ago quarter. Total revenues rose 2 percent to $747.2 million, with comparable sales up 3 percent on top of a 9 percent gain a year ago.
By brand, J. Crew sales fell 2 percent to $516.8 million, although comp sales were up 1 percent on top of a 6 percent gain a year ago. Madewell continues to demonstrate brand strength, with sales rising 13 percent to $178.1 million and comp sales up 9 percent on top of a 22 percent gain in the same year-ago quarter.