Vera Bradley Bags Strong Debut

Two companies dependant on discretionary consumer spending habits pulled off successful IPOs on Thursday, with Bravo Brio Restaurant Group Inc. up 13.9% and handbag designer Vera Bradley Inc. up 55.3% on their first day of trading. The pair's performances—following pricings within their expected ranges—indicate that investors may be more willing to take a chance on initial public offerings tethered to an economic recovery in the U.S. The majority of IPOs with double-digit percentage gains this fall have been concentrated in fast-growing Chinese industries. Both Bravo Brio and Vera Bradley are American businesses. No one expects two deals alone to open the IPO market to an avalanche of companies. Just last week, another women's apparel retailer, Body Central Corp., priced poorly and ended its first day of trading flat; it remained at that level at the close Thursday. But the window could be edging wider for companies that experienced some growth during the economic downturn and offer affordable products to a broad segment of consumers. In Vera Bradley's case, its handbags, wallets and duffle designs have drawn a following across age categories, from 'tweens to grandmothers. With price points between $15 and $130, the bags can fit into most budgets, said Chief Executive Michael Ray. "It's easy for our customers to treat themselves, and that's what insulated us at a time when others might have been struggling," said Mr. Ray. Bravo Brio, the first American restaurant IPO since 2006, relies on a similar strategy. Its average dinner check ranges from $22 to $31 a person, and the restaurant turns out large portions in a white-tablecloth setting. The company operates 85 Italian-themed restaurants in 28 states under the Brio Tuscan Grille and Bravo Cucina Italiana awnings. It competes against names like Cheesecake Factory Inc. and P.F. Chang's China Bistro Inc. Bravo Brio Chief Executive Saed Mohseni said that he fielded a lot of questions from potential investors about consumer behavior and spending habits during the company's road show. "We've clearly seen an improvement in consumer traffic and in the amount of money they spend," said Mr. Mohseni. Neither Bravo Brio nor Vera Bradley sailed through the economic downturn unscathed. Both warn that their businesses would suffer if the economy takes a further slide. That's an element of risk IPO investors would have avoided a few months ago. Although Bravo Brio's net revenue rose throughout the economic downturn, the company sports years of bottom-line losses, in part due to decreases in comparable-restaurant sales in 2008 and 2009. In the 26 weeks that ended in June, revenue increased 11%, the majority of which was attributed to new restaurant locations; it also produced a modest profit compared to a loss in the same period of 2009. Vera Bradley saw net revenue decline 15% in fiscal 2009 as the economic environment weakened. But in fiscal 2010, which ended in January, net revenue grew 21% despite a continued recession as the company expanded its own store openings and reduced its inventory at other retailers. In the six months that ended July 31, net revenue increased by 26% from higher sales at its own and other retailers, and net income nearly doubled. The company's full-price stores produced same-store sales growth of 36% in fiscal 2010, and 26% in the six months ended July 31. In its prospectus, the Indiana-based company said it expects consumer demand and the financial stability of other retailers to continue to improve in fiscal 2011. Vera Bradley's offering was widely expected to do well, and it priced at $16, the high end of its proposed range. Bravo Brio's didn't have the same magnitude of interest, pricing at $14, the low end of its range, and drawing less of a first-day pop.