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Forever 21 IPO Would Make a Killing Right Now

Forever 21 is a hot retail store with tremendous retail appeal. But it’s also a privately held company — one soundly in the hands of the Chang family, which founded Forever 21 in Los Angeles about 20 years ago.

There has long been speculation whether founder and CEO Do Won Chang would ever take the company public and what a Forever 21 IPO would look like. There’s no guarantee a filing will happen anytime soon — but if it did, Forever 21 would make a killing with its initial public offering.

First, consider how well-established this company is already. Forever 21 boasts roughly $3.4 billion in revenue according to Forbes, and 30,000 employees with 480 locations. That puts it on par with the likes of American Eagle Outfitters (AEO) and Urban Outfitters (URBN) — though it’s worth noting that AEO has about twice the locations despite similar revenue. Forever 21′s revenue is easily twice or three times that of specialty retail stocks like Buckle (BKE) and American Apparel (APP).

That kind of stability is very attractive to investors.

Next, let’s consider Forever 21′s customer base and positioning. The retailer appeals largely to teens and young adults looking for stylish but affordable apparel. For instance, right now, Forever 21 is offering camis for just $1.80 on its website and has a host of chic tops, shorts and dresses for under $20. That’s a far cry from some of the high-end apparel that can hit three figures just for a single article of clothing — and that kind of positioning hits very close to home for consumers in this difficult economic environment.

Lastly, let’s consider the recent retail IPO buzz and a few huge successes:

Seems like the time is ripe for retail IPOs based on this group of companies.

It’s worth noting, too, that the best time to be in growth mode is during an economic expansion — so getting into the public market now before a cyclical recovery in 2014 or 2015 would be a wise move strategically.

This is all just speculation, of course, since neither the Chang family nor company insiders have seriously talked about a Forever 21 IPO. For the last several years there have been rumors, but nothing of substance yet.

Still, Forever 21 is expanding at a rapid rate, and an IPO would be well-timed if the company chooses to file soon.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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