Teavana shares pop 65% on IPO

July 28, 2011: 5:03 PM ET

NEW YORK (CNNMoney) -- The investment world is fixated on the uncertainty surrounding the debt ceiling debate. But everyone still needs to grab a cup of coffee and a little something to eat.

Maybe that's why this week's three retail initial public offerings have performed so well; Teavana (TEA) and Chef's Warehouse (CHEF) debuted today, while Dunkin Donuts (DNKN) premiered Wednesday.

Shares of Teavana, which sells tea and tea-related products in mostly mall-based stores, traded more than 65% above the $17 offering price the company set Wednesday, while shares of gourmet food company Chef's Warehouse shares rose 17% above their original offering price of $15 per share.

This follows the Dunkin Donuts IPO on Wednesday, when shares of the national donut chain jumped 40%.

Consumer IPOs may not generate as much buzz as technology offerings like LinkedIn, Zynga, Groupon or Facebook, but they've performed remarkably well this year. Retailers who have gone public this year are up 60% on average from their debut, according to IPO tracking firm Renaissance Capital. That's compared to an average return of 16% for all IPOs so far this year.

"It's pretty simple for consumer retail IPOs: I have a business that works in 150 or so stores and I believe there's an opportunity to expand this model into 800 stores," said Paul Bard, an analyst with Renaissance Capital.

These IPOs have also benefited from what has been a particularly strong year for retail overall, with the S&P 500 Retail ETF (XRT) hitting an all-time high earlier this summer.

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"The whole retail sector continues to outperform the broader market," said Christopher Murphy, managing director who covers retail for Cantor Fitzgerald. "There are some concerns that margins and consumer demand may take a hit in the second half of the year, but overall the sector has been very strong."

A compelling story and business potential can more than offset the market concerns over the debt ceiling, Bard and Murphy both said.

In the case of Teavana, the company has roughly 150 stores nationwide, giving it a lot of room to expand. Tea is also a growing but statistically under consumed beverage in the coffee-loving U.S.

Dunkin Donuts may be a national brand, but the company's stores remain sparse in most of the western parts of the country.

"Investors are intrigued by retailers like Dunkin and Teavana that have a lot of growth potential," Bard said.

The overall IPO market has been particularly strong in July, which is typically a lazy summer month for Wall Street. There will be 12 IPOs this week alone, making it the busiest week for offerings since November 2007, according to Renaissance Capital.  To top of page

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