Kidpik Corp., the five-year-old children’s wear subscription business, has joined the IPO stampede.
Kidpik started trading on the NASDAQ today, seeking to benefit from the nation’s pent up consumer demand, the availability of capital, and the brand’s positioning in a niche with growth potential. There’s been a wave of recent fashion initial public offerings, among them Rent the Runway, Torrid, On, Dr. Martens, Three Up, Allbirds and Warby Parker.
In Kidpik’s IPO, 2,117,647 shares of common stock at $8.50 a share were issued, for aggregate gross proceeds of about $18 million prior to deducting underwriting discounts, commissions and offering expenses, and excluding any exercise of the underwriters’ 45-day option to purchase up to 315,647 additional securities. The shares are trading under the symbol “PIK.”
The Kidpik IPO is in addition to the 5,500,187 common shares that already existed. Based on the share price and number of shares, the company is valued attending roughly $65 million. The offering is expected to close on Monday, subject to customary closing conditions.
In 2020, Kidpik generated $16.94 million in revenue and lost $4.19 million, representing improvement from 2019 when revenues reached $13.52 million and there was a loss of $4.6 million, according to the IPO prospectus. In 2020, revenues grew 25.3 percent.
For the company’s first half of this year, which ended July 3, revenues were $10.99 million and the loss was $2.9 million.
Over its five-year history, Kidpik has distributed more than one million boxes. During the first six months of this year, about 1.1 million units of clothing were sent out.
“The subscription industry is growing at leaps and bounds,” Ezra Dabah, chairman and chief executive officer of Kidpik, told WWD. “Within the subscription audience, which in our case is a 25-to-50-year-old parent, clothing and curation is what what they desire most.”
Kidpik offers styles for girls, boys and toddlers.
Kidpik distributes boxes of fashion, footwear and accessories for boys and girls under the Kidpik label. Families have the option of receiving the Kidpik boxes every four, six or 12 weeks. Sizes 2T to 16 are offered and each box contains seven items – five pieces of clothing, a pair of shoes and an accessory – to create three mix-and-match, coordinated outfits that are personalized based on information from a questionnaire filled out upon subscribing, and data obtained from items kept and returned. Kidpik products are designed by a team in New York, where the company is based. The distribution center is in Rancho Cucamonga, Calif.
“Coordination is one of our real differentiating factors, and being vertical integrated, we cut out the middleman and we are able to deliver value,” said Dabah. “As you know, the children’s industry is extremely price sensitive.”
He said that on average, parents are paying $98 for a box, which comes to $14 an item since there are seven items in each box, though the boxes range in price from $80 to $130.
According to Dabah, Kidpik sits on an immense amount of data that’s growing and will enable the company to continually improve its personalization efforts as more data pours in. “Households really trust the brand,” he said.
He also said Kidpik has a low rate of return. “For every ten units we send, approximately seven units, 68 percent, are kept,” said Dabah. “We think that’s a very good number and it proves our internally-built algorithm and technology driving the personalization is working well.”
He cited benefits to subscribing aside from saving parents trips to the mall and figuring out what to select for their children.
“The unboxing experience for the kid is really fun and exciting and they feel more independent because they can decide what to keep,” said Dabah. “The box is addressed to the kids, in care of their parents. We hear about kids waiting by their mailboxes for the Kidpik delivery. Kids usually don’t get mail. From the mom’s point of view, she gets a personalized stylist for her kid.”
According to the prospectus, Dabah is the principal stockholder, controlling about 93.7 percent of the voting power prior to the IPO.
Asked if Kidpik is somewhat on the small side for an IPO, Dabah replied, “You could say that, but there are quite a few micro type offerings. It’s important the majority of the money will be to grow the company, both vertically with more subscribers, and horizontally by introducing additional products. Initially we were very focused on girls only. But we launched boys in the middle of last year, and we launched toddlers earlier this year. We are potentially going into newborns, and potentially DIY boxes, where items can be personalized, like coloring sneakers.”
The prospectus indicates that money raised through the IPO will be used for general corporate purposes, including working capital, operating expenses, marketing and advertising expenses, hiring additional personal to build organizational talent and capital expenditures and to repay debt. The company had about $8 million in debt as of Oct. 6.
The prospectus also indicates that the money raised in the offering will be sufficient to fund operations for the next 36 months and that additional funding, through the sale of debt or equity, may be needed in the future to expand.
While there have been widespread reports of COVID-19 and labor-related merchandise shortages plaguing many retail companies, Dabah said that at Kidpik, “We have most everything what we need for holiday. We have managed through this challenge, which has been somewhat of a difficult one. Product is costing us somewhat more.”
Dabah is part of a well-known family of merchants and entrepreneurs including his brother Haim, who actually competed against Ezra by starting up Kidbox, another children’s box subscription business, in 2016, the same year Kidpik was started. Haim has since detached from the operations of Kidbox and currently operates Box Equities, which buys industrial real estate. Haim, Ezra, a third brother Isaac and their father founded Gitano, which peaked into a major denim label for the mass market in the 1980s.
“We are as good as brothers as anyone would expect. We don’t talk business, not as it relates to this particular business,” said Ezra.
While Kidpik and Kidbox are both children’s subscription businesses, Kidpik is entirely private label while Kidbox offers brands. Also, Kidpik sells footwear which Kidbox doesn’t. Asked if anybody ever confuses the two brands, Ezra replied, “Once in a blue moon.”
Ezra has much experience in children’s wear and running a public company. In 1990, he took the helm of The Children’s Place when it was a $150 million business and as he said, “profitably pivoted the brand from being a store for brands, to a brand that has stores.” He took Children’s Place public in 1997, and left the company in 2007 when the business generated over $2 billion in sales. He resigned from the company amid a dispute the board.
Dabah recruited to Kidpik several executives that he worked with at The Children’s Place. He also serves as CEO of Nina Footwear, a wholesaler of women’s and kids’ shoes and accessories. Ezra Dabah and his family own 86.36 percent of Nina Footwear.
Dabah believes that mothers generally don’t find it easy to style a child. “She is not a born merchant or a born stylist. One of our bigger differentiating factors from the few competitors that we have is that we provide coordinated outfits and do it so well because we are vertically-integrated. We think about outfitting right at the beginning of the process.
“We service all the difference looks and lifestyles – classic, trendy, girlie, active. We are very inclusive,” said Dabah.
Kidpik sends out mix and match, personalized children’s outfits.