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Savers Value Village (SVV.N), the thrift store operator owned by private equity firm Ares Management (ARES.N), made a splash in its market debut on the New York Stock Exchange, with a market capitalization of nearly $4 billion. 

Savers Value Village joins a growing list of companies that have enjoyed warm receptions in recent months, signaling a potential thaw in the once frosty IPO market. This revival of investor interest could encourage other IPO hopefuls to list their shares after waiting out the stormy economic climate of 2022.

Combined with lower volatility and the U.S. Federal Reserve’s decision to pause rate hikes, this positive trend is expected to widen the IPO window as the year progresses.

Savers Value Village’s decision to go public was driven by the lack of a strategic buyer that could accommodate its large size. Savers’ CEO Mark Walsh stated that the IPO was the smartest option for the company to move forward, considering it is nine times larger than the next largest for-profit thrift operator.

The stock opened at $24.77 per share, a 38% increase over the IPO price of $18 per share. Savers Value and Ares raised over $401 million in the share sale.

This successful IPO debut for Savers Value Village demonstrates investor confidence in the growing thrift store sector, which has grown at an estimated CAGR of 4.5% over the past five years. Other thrift store retailers may see this as an opportunity to consider going public or expanding their operations to meet the growing demand for sustainable and affordable shopping options.

Ares plans to retain an 88% stake in the company which they acquired in 2021. Savers was founded in 1954, and currently has over 300 locations across the US, Canada, and Australia under the names Savers, Value Village, and Village des Valeurs.

BrainTrust

“This is a good ol’ private equity play. Ares could not find any other professional investment groups. (I wonder why?) Therefore, they decide to go public.”

Gene Detroyer

Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.


Discussion Questions

Is Savers’ strong valuation a signal of confidence in the retail market? Or are investors betting on consumers tightening their spending habits?

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5 responses to “Is Savers’ $4B Thrift Store Valuation a Good Sign for Retail or a Bet on Budget Shopping?”

  1. Gene Detroyer Avatar
    Gene Detroyer

    This is a good ol’ private equity play. Ares could not find any other professional investment groups. (I wonder why?) Therefore, they decide to go public.

    The raise gives the company a $4 billion market cap, of which Ares gains $3.6 billion. Don’t be surprised if the initial IPO buyers were in at $18 and already out at $25.

    1. Dave Wendland Avatar
      Dave Wendland

      You’re right, Gene, this valuation is a tremendous parachute for Ares. And investors will want to keep an eye on the stock price. That doesn’t diminish the shopper fervor for thrift shops.

  2. Dave Wendland Avatar
    Dave Wendland

    In 2022, retail analytics firm GlobalData predicted that the global fashion resale market is expected to grow 127% by 2026, which is three times faster than the wider retail clothing industry.

    For that reason, I think the valuation is justifiable. Consumers have become weary in these uncertain economic times. However, shoppers have also realized that “thrifting” unearths some incredible merchandise while providing an affordable means to stretch their dollars. I foresee no signs of this trend going away — even as the economy rebounds.

  3. Dave Bruno Avatar
    Dave Bruno

    This valuation seems to me to be a reflection of many market/investing factors beyond the actual potential of a for-profit thrift store enterprise. Yes, thrifting is certainly experiencing meaningful growth right now, but there is a difference between “fashion resale” and “thrift retailing.” Much of the boom (and market hype) in fashion resale is being driven by brands reselling their own labels through their own channels. Often times, at least in luxury segments where much of the boom is happening, the products have been refurbished and restored and come with many of the quality assurances (and return options) of new products. That’s very different from rummaging through racks of miscellaneous second-hand items of varying quality. In my mind, it’s a bit like the difference between buying a used car from a lot on the side of the road versus buying a “certified pre-owned” car from a new car dealer’s used car inventory. I wish them well, but will watch Savers’ stock price closely in the coming weeks…

  4. Brian Cluster Avatar
    Brian Cluster

    Investors may have invested in the long-term prospects of the segment. According to Statista reports, thrift retail is expected to grow faster than retail as a whole. The consumer mindset of college students and other younger shoppers has changed in the last five years ( before inflation started). Thrifting is totally acceptable for this consumer segment not only because it saves money but it is environmentally friendly. In the coming years, this mindset may stick as younger consumers gain further professional success and could transition toward higher-quality second-hand brands.

5 Comments
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Gene Detroyer
Gene Detroyer
1 month ago

This is a good ol’ private equity play. Ares could not find any other professional investment groups. (I wonder why?) Therefore, they decide to go public.

The raise gives the company a $4 billion market cap, of which Ares gains $3.6 billion. Don’t be surprised if the initial IPO buyers were in at $18 and already out at $25.

Dave Wendland
Dave Wendland
  Gene Detroyer
1 month ago

You’re right, Gene, this valuation is a tremendous parachute for Ares. And investors will want to keep an eye on the stock price. That doesn’t diminish the shopper fervor for thrift shops.

Dave Wendland
Dave Wendland
1 month ago

In 2022, retail analytics firm GlobalData predicted that the global fashion resale market is expected to grow 127% by 2026, which is three times faster than the wider retail clothing industry.

For that reason, I think the valuation is justifiable. Consumers have become weary in these uncertain economic times. However, shoppers have also realized that “thrifting” unearths some incredible merchandise while providing an affordable means to stretch their dollars. I foresee no signs of this trend going away — even as the economy rebounds.

Dave Bruno
Dave Bruno
1 month ago

This valuation seems to me to be a reflection of many market/investing factors beyond the actual potential of a for-profit thrift store enterprise. Yes, thrifting is certainly experiencing meaningful growth right now, but there is a difference between “fashion resale” and “thrift retailing.” Much of the boom (and market hype) in fashion resale is being driven by brands reselling their own labels through their own channels. Often times, at least in luxury segments where much of the boom is happening, the products have been refurbished and restored and come with many of the quality assurances (and return options) of new products. That’s very different from rummaging through racks of miscellaneous second-hand items of varying quality. In my mind, it’s a bit like the difference between buying a used car from a lot on the side of the road versus buying a “certified pre-owned” car from a new car dealer’s used car inventory. I wish them well, but will watch Savers’ stock price closely in the coming weeks…

Brian Cluster
Brian Cluster
1 month ago

Investors may have invested in the long-term prospects of the segment. According to Statista reports, thrift retail is expected to grow faster than retail as a whole. The consumer mindset of college students and other younger shoppers has changed in the last five years ( before inflation started). Thrifting is totally acceptable for this consumer segment not only because it saves money but it is environmentally friendly. In the coming years, this mindset may stick as younger consumers gain further professional success and could transition toward higher-quality second-hand brands.