| close this window |
| Source: | LOHAS Weekly Newsletter |
| Published: | Wednesday, December 01, 1999 |
Boston-based Tucker Anthony Cleary Gull and Adams, Harkness & Hill (AH&H) underwrote the offering. Net proceeds will be used for working capital, debt reduction and general corporate purposes, potentially including acquisitions and strategic minority interest investments.
The Street apparently has given the stock a thumbs up.
GAIA opened at $5.50 per share and closed at $6.38 at the end of its initial day of trading. On Nov. 24, the stock closed at $9.88/share.
Both Tucker and AH&H on Nov. 23 initiated coverage of GAIA at Strong Buy. Tucker gave the stock a 12-month price target of $14. AH&H’s target is $15.
“One measure of success is that it’s up from the offering price,” says Gary Giblen, equity analyst and managing director of Banc of America/Montgomery Securities in New York. “I take that as a semiresounding cheer for the broadly defined healthy living sector as something that’s of interest to Wall Street.”
Lynn Powers, Gaiam’s president, says the company is “very pleased” with the stock’s performance to date.
Gaiam produces and sells goods, services and information through its catalogs Harmony (natural household products); Living Arts (personal development products and information); and InnerBalance (alternative health care products and solutions). The company’s target market is a group defined as the “cultural creatives,” estimated at about 44 million in 1994, according to a research study published in 1996 by the Institute of Noetic Sciences. These consumers assign high value to environmental consciousness, promoting a sustainable economy, healthy lifestyles and personal development. The study’s author, Paul Ray, joined the Gaiam board of directors at the completion of the public offering.
Natural Business identifies the collective businesses serving these consumers as the LOHAS industry, an acronym for Lifestyles of Health and Sustainability. Conservative estimates for U.S. sales for this new industry are $230 billion for 1999, shared among five categories: Sustainable Economy, Healthy Living (encompassing natural and organic foods and dietary supplements), Alternative Healthcare, Personal Development, and Ecological Lifestyles, according to an upcoming report produced by Natural Business Communications.
Gaiam was founded in 1988 in Boulder, CO. From 1996 to 1998, revenues for the company increased from $14.8 million to $30.7 million, a compound annual growth rate of approximately 44%. The company says in its prospectus that its number of unique individual customers grew from 300,000 at the end of 1996 to 800,000 by June 30, 1999.
Historically, Gaiam sales have been through catalogs and retailers such as Amazon.com, Target and Borders, but the company says it is shifting sales emphasis to the Internet and intends to make that its primary channel of distribution. Its Gaiam.com site, launched on Aug. 30, is a wholly owned subsidiary of Gaiam Inc., and already accounts for about 15% of the company’s current sales, with 50% margins, a $7 million run rate and an average order size of $140, according to analysts.
“About two-thirds of visitors to the site are new customers, not existing customers—we think they come through word-of-mouth or word-of-e-mail,” Powers says.
Though catalog customers account for only one-third of Gaiam.com’s buyers, Banc of America’s Giblen says these consumers are natural converts to Internet customers. “The Internet is a more efficient and more effective way to service customers and is the wave of the future.”