J. Crew Makes Fashionable Debut as Its Shares Jump 28% on 1st Day

J. Crew Group Inc. shares jumped 28% in their market debut on Wednesday, a sign of investor confidence in the preppy retailer, even though shares of other apparel companies have sagged in recent weeks.

Shares of the casual men’s and women’s clothing and accessories company rose $5.55 to $25.55 in their first day of trading on the New York Stock Exchange, a day after the initial public offering priced higher than the forecast range.

“The demand for shares was humongous,” said Fran Radano, a fund manager for Gartmore Global Investments Inc., which owns stock in the newly listed company. “It was probably a little more crowded IPO than the typical retail IPO, and given the dearth of shares it created a pretty big supply-demand imbalance.”

More than 13 million shares had changed hands within the first hour of trading. About 18.8 million shares were offered.

Shares of other apparel companies did not fare nearly as well Wednesday. The Dow Jones U.S. apparel retailers index fell 0.2%.

Gap Inc. slipped 3 cents to close at $16.89, while teen retailer Abercrombie & Fitch Co. fell $1.48 to $55.21. Urban Outfitters Inc. lost 18 cents to $16.18.

Many top retailers have been weak in the last year, with Urban Outfitters tumbling 42%, Abercrombie & Fitch losing 16% and Gap dropping 13%.

The sector has lost about 3% in the last 12 months, compared with a 3.7% gain in the S&P; 500 index.

J. Crew, which has launched a line of children’s wear called Crewcuts and is planning a lower-priced line of casual clothes under the name Madewell, is expected to show better growth than many of its more mature peers, said Brad Stephens, a retail analyst for investment firm Morgan Keegan.

“It has a good brand name,” Stephens said. “There are two other concepts that are potential growth vehicles and Mickey Drexler has been running it. His name is going to be worth a little bit here to the valuation.”

J. Crew Chief Executive Drexler had previously headed Gap, whose Banana Republic apparel chain competes for J. Crew customers.

When he was hired as chief executive in 2003, Drexler and Texas Pacific Group invested $20 million in the company.

At $25 per share, Drexler’s immediate stake in J. Crew was worth more than $115 million. He also holds stock options that can be exercised in intervals over the next nine years that are worth more than $56.6 million.

The New York-based company priced at a higher-than-expected $20 a share Tuesday, raising about $376 million and giving it an initial market capitalization of about $1.1 billion.

Despite early investor optimism, risks remain, Gartmore’s Radano said.

“It’s very much a merchant-driven company, dealing with an upper-income demographic that is spot-on to the current environment,” Radano said.

“But because it’s merchant driven, at some point, these guys are going to miss [the fashion trend].”