Retailer Strouds to go public with $54 million IPO.

Having weathered a tough recession, Strouds Inc., the City of Industry-based retailer of bed, bath and tabletop products, now plans to raise up to $54.3 million on Wall Street, free itself of debt and penetrate markets outside California.

The 16-year-old retailer plans an initial public offering of up to 3.88 million shares at about $13 each, to be traded on the NASDAQ under the symbol "STRO."

Strouds, which posted net income of $2 million on sales of $158.1 million in the fiscal year ended Feb. 24, now employs 1,245 and operates 49 stores, 47 of which are in California. Two stores are in Las Vegas.

After the IPO, Strouds plans to open 16 stores in 18 months, all outside the state.

The company, under the direction of founder and Chairman Wilfred "Bill" Stroud, now 69, opened its first store, the 4,400-square-foot "Strouds Linen Warehouse," in Pasadena in 1979. Like other early Strouds stores, the first was an off-price warehouse retail operation.

Stroud had been a home textiles division manager with Carter Hawley Hale, the department-store chain.

Wayne Selness, 49, Strouds' $177,528-a-year chief executive, is also a former Carter Hawley Hale executive. He joined Strouds in 1980 and has been chief executive since May of this year, replacing founder Stroud.

Through the 1980s, Strouds flourished in the growing California market, increasing both its number of stores and individual store size. In 1988, Strouds introduced its "superstore" concept; such stores were larger and more-upscale in product and price. Now, 33 of the Strouds' 49 branches are superstores.

But the California recession of the 1990s evidently whacked Strouds fairly hard -- especially since the chain had almost no stores outside the state.

One measure of the recession on Strouds: average sales per square foot of store space in 1993 of $283 was still below that of $296 in 1989, even before adjustment for inflation.

Although revenues grew from $108.6 million in fiscal 1989 to $158.1 million in fiscal 1993 due to an increase in stores and store size, net income only grew from $1.8 million to $2 million.

Much of Strouds' late 1990s expansion has been debt-financed.

Still, all through the recession, Strouds never lost money on annual terms -- something many other retailers, such as Standard Brands, Builders Emporium or Carter Hawley Hale, cannot claim.

The Strouds stock offering money will be used to pay down debt owed to a major shareholder, and for the out-of-state market penetration.

About $17 million of the $54.3 million offering will be used to pay off loans from the New York-based BT Capital Corp., an investment company which is part of the Bakers Trust empire. Noel Urben, president and director of BT Capital, also sits on the Strouds board.

Other money will be used to pay down a revolving credit debt, and $5.4 million will go for Strouds' upcoming expansion. The expansion will also use funds from the revolving credit facility.

After the offering, insiders and BT Capital will control more than 60 percent of Strouds stock -- only about 40 percent of the company is being sold to the public.

San Francisco-based Montgomery Securities and Baltimore-based Alex. Brown & Sons are the underwriters on the Strouds IPO. The Los Angeles-based law firm Latham & Watkins was counsel to Strouds, while major CPA firm KPMG Peat Marwick provided accounting services.