Levi's Makes its Return to the Stock Market

Last Wednesday, February 13th, a 166-year-old denim brand filed its paperwork with the SEC. You’re more than likely familiar with this brand — Levi Strauss & Co. will return to the stock market after a 34-year absence.

Levi’s has been known for its iconic Levi’s blue jeans. The company was created in 1853 and offered a product that was greatly needed for the working class — its denim work pants used rivets to give strength to the pants’ seams — and it became a reliable brand.

As I mentioned earlier, this isn’t the first time the company has gone public. It went public back in 1971, but board members decided to take the company private again.

A few years ago, the company was having a hard time catching air. It was drowning in heavy debt and was attempting to reinvent itself in a competitive market. The company was reliant on department stores to sell its products, and as we’ve witnessed over the past few years, there has been a decline in the traditional department store model for retail.

That’s not to mention the emergence of an entirely new market of retail called athleisure. Consumers weren’t interested in denim, but instead focused on brands that sold comfortable and stylish clothes that could be worn every day or when working out at the gym or yoga class. It was a trend that affected a lot of traditional brands.

Back in 1997, sales for Levi’s were at a peak, coming in around $7 billion. Those sales began to decline, and five years later the company reported sales at $4.1 billion. It needed a new approach to stay a brand that people bought from. If Levi’s didn’t focus on this, then it could very well see an even further decline in sales and eventually face inevitable bankruptcy.

Levi’s didn’t sit by and let its brand, which has been a part of many consumers’ lives and was a brand to be trusted, come to its demise. The company decided to changes things up a bit…

It Was Time for Some Change

A lot has changed for Levi’s. It has stepped up its marketing efforts over the last two years, focusing on sporting events and musical festivals to grab consumers’ attention.

For some, it might seem like clothing retail is slowly dying, or at least not what it once was. And while there may be some retail trends that we’ve become familiar with over a couple decades that just don’t work anymore, that doesn’t mean the whole industry is dying. People still need clothes and still want to stay up with the hottest trends.

Yes, there will be a few things that will change for retail companies and how they conduct their businesses, but that’s just something those companies need to factor in when making plans for growing revenue. And that’s exactly what Levi’s aimed to do — adjust its business to be more appealing and improve consumer awareness rather than placing the brand as a thing in the past.

Chip Bergh was a 28-year Procter & Gamble executive when he came to Levi’s as CEO back in 2011. Under his leadership, the company didn’t jump on the yoga pants trend, but instead it focused on its products and how to improve them. The company improved its women’s jeans by adding more stretch material and improving their overall look. The company also decided to think outside the box of just denim and focused on tops.

The company also removed itself from the department store model and opened up its own stores. In 2018, it opened up 74 more stores. This would give consumers more access to the company and its products. If someone were to order jeans online and wanted to return them, they could do so at a store and maybe even end up spending more money if they see something they like at the store and have the opportunity to try it on.

Levi’s has also dedicated efforts to paying down a huge chunk of its debt. Between 2011 and last year, its debt fell from $911 million to $444 million. That’s a significant amount of debt to get rid of. Bergh believes the company could eventually become a $10 billion a year company. In a recent interview, he said, “Levi’s lost a generation of consumers in the early 2000s, but today our customers are younger than ever — and we’re gaining momentum as we bring them back.”

And that’s why right now is the perfect time to become a publicly traded company… again.

What to Expect from the Levi’s IPO

Levi’s plans to raise about $100 million through its initial public offering. The amount of shares to be offered is still up in the air at the moment.

Regardless of what the numbers come down to when the company gets closer to its IPO, it plans to use its IPO proceeds for “general corporate purposes” that will include operating expenses and possibly future acquisitions and other investments to grow its brand and the company.

The company had $5.6 million in revenue in fiscal year 2018. The Americas contributed 55% of sales, Europe 29%, and Asia 16%. It’s expanded its global efforts and sales, which is huge — and very important to take note of. Its net income has grown from $135 million in fiscal year 2011 to $285 million in fiscal year 2018, a CAGR of 11.3%.

There are 12 underwriters on the deal, led by Goldman Sachs. The company will make its second market debut on the New York Stock Exchange under the ticker symbol “LEVI.”

Levi’s IPO could be the one we’ve been waiting for in 2019 to really help the market take off. To stay up to date on this IPO and others that are forthcoming, click here. Stay informed!

Until next time,

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.