Despite all the problems facing retailers in 2013 – such as the strong Australian dollar, online and overseas shopping, increased competition from global retail brands and weak consumer sentiment – many retail stocks have recorded impressive share price appreciation over the course of the year.
The strong share price performance of retailers set the scene for an opportune time for private equity firm Anchorage Capital Partners to float electronics retailer Dick Smith (ASX: DSH), which it had purchased barely 12 months earlier from Woolworths (ASX: WOW).
With expectations of post-Christmas sales reaching $15.1 billion, the positive sentiment surrounding retail stocks looks set to continue. Specifically, the newly listed Dick Smith is garnering attention from a couple of highly regarded investors.
Perpetual (ASX: PPT) took a substantial position in the retailer during the float at the offer price of $2.20 and have purchased more stock on market as high as $2.30.
Meanwhile, Paradice Investment Management last week issued a notice of initial substantial holding in Dick Smith of 5.139%. It appears Paradice purchased $20 million of stock in the IPO and since then has purchased a further $5.6 million of stock on market.
Dick Smith might be rejuvenated, but it still has a tough task ahead of it as it competes with market darling JB Hi-Fi (ASX: JBH). The recently announced deal with David Jones (ASX: DJS) to run their electronics department is one example of management's innovative approach to grow the Dick Smith brand and volumes.
Foolish takeaway
With the shares last trading at $2.10, investors can pick-up stock at a 10 cent discount to the initial public offer (IPO) price of $2.20 – the price at which Perpetual and Paradice may have accumulated most of their holdings at. With the prospectus forecasting a trebling of earnings for Dick Smith in financial year 2014, it may be worth investors who passed on the IPO taking a closer look now.
