Specialty retailer rue21 (RUE) scheduled to trade Friday Nov 13

Compare & contrast with Dollar General (DG) also scheduled to trade the same day. RUE should do better than DG based on

Higher gross margins

Virtually no interest payments

In an earlier stage of growth than DG

RUE has a more consistent record of profitability.

rue21	RUE, C+, 7					Post-IPO shares: 24.2mm
teenage apparel			Jan 31 fiscal year
Warrendale, PA	2007	2008	2009	08 six mos	09 six mos	IPO Mkt
Rev ($mm)	$226	$297	$391	$175	$233	Cap (mm)
Gross profit %	33%	34%	34%	34%	36%	$411
Operating income	$12	$18	$22	$9	$11	@$17
Operating inc % of reve	5.3%	5.9%	5.6%	5.4%	4.7%
Interest Exp	$3	$3	$2	$1	$0.3
Interest Exp % of Op incone	22%	14%	7%	10%	3%
Net income	$8	$9	$13	$5	$8
Net income %	3.5%	3.1%	3.2%	2.9%	3.6%
VALUATION RATIOS	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
annualized most recent qtr	Cap (mm)	Sales	Earnings*	BookValue	TangibleBV	in IPO
rue21 (RUE)	$411	0.9	24.7	8.4	8.4	28%
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	2	2	1	7
COMPARE & CONSTRAST
VALUATION RATIOS	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
annualized most recent qtr	Cap (mm)	Sales	Earnings*	BookValue	TangibleBV	in IPO
rue21 (RUE)	$411	0.9	24.7	8.4	8.4	28%
Dollar General (DG)*	$7,493	0.7	19.4	2.4	-3.1	10%
adj for debt reduction form IPO proceeds
			Dollar General	Rue21
			09six mos	09 six mos
Rev ($mm)			$5,682	$233
Gross profit %			31%	36%
Operating income			$458	$11
Operating inc % of reve			8.1%	4.7%
Interest Exp			$152	$0.3
Interest Exp % of Op incone			33%	3%
Net income			$193	$8
Net income %			3.4%	3.6%
BUSINESS
. Fast growing specialty apparel retailer offering the newest fashion trends for girls and guys at value prices. Operates over 500 stores in 43 states.
. Merchandise is designed to appeal to 11 to 17 year olds who aspire to be "21" and adults who want to look and feel "21"
HIGHLIGHTS
Flexible Real Estate
Strip centers, regional malls, outlet centers. As of October 3, 2009, approximately 51% of stores were located in strip centers, 27% in regional malls and 22% in outlet centers. Stores are located primarily in small- and middle-market communities that RUE believes have been underserved by traditional specialty apparel retailers. As a result, RUE is often the only junior and young men’s specialty apparel retailer in such communities. In these markets, the limited competition comes from large value retailers and department stores.
Balanced Growth
. New stores, store conversions, comparable store sales. RUE drives sales growth through opening new stores, converting existing stores into our new, larger rue21 etc! layout and increasing comparable store sales. . In fiscal year 2009, plans to open 88 new stores, including 78 new stores opened as of October 3, 2009. Also plans to convert 26 stores, including 24 stores converted as of October 3, 2009, to a larger layout that includes a separate rue21 etc! store-in-store.
. Presence in locations with limited direct competition. Focuses on small- and middle-market communities, which RUE defines as communities with populations between 25,000 and 200,000 people, where household incomes do not typically support higher-priced retailers. As a result, RUE often is the only junior and young men’s specialty apparel retailer in a shopping center and faces limited direct competition in these communities.
COMPETITION
. From major specialty apparel retailers that offer their own private label assortment, including Aéropostale, American Eagle Outfitters, Charlotte Russe, Forever 21, the Gap, J. Crew, Metropark, Old Navy and Wet Seal, as well as national off-price apparel chains such as TJX Companies, Burlington Coat Factory, and Ross Stores. . Also faces competition from department stores such as Dillard’s, and JC Penney, and large value retailers such as Walmart, Target and Kohl’
HISTORY
. Sought bankruptcy protection in February 2002 and emerged within fifteen months as a stronger company with a rationalized store base of 168 stores. Has been growing consistently since that time. . In late 2006, introduced the larger rue21 etc! store layout, which averages approximately 4,700 square feet and features a separate store-in-store for rue21 etc! girls jewelry and accessories category. . As of October 3, 2009, we operated 527 stores in 43 states, 302 of which featured the larger rue21 etc! store layout.
USE OF IPO PROCEEDS
. $21 to company to repay debt from sale of 1.65mm shares
. Shareholders intend to sell 5.12mm shares