Levi Strauss, With A $6.6 Billion Valuation, Is Making A Comeback As A Public Company
Levi Strauss, one of Americas oldest companies and the inventor of the blue jean, will begin its second stint as a public company on Thursday.
Levis, which got its start during Californias gold rush and built a reputation as a purveyor of sturdy mens jeans, has made a comeback in recent years. Under new leadership, the 165-year-old company has reduced a crushing debt load, ramped up its marketing and invested in different product categories.
Tops and womens jeans are now the fastest-growing parts of its business. In 2018, revenue from its tops grew 38% to $1.1 billion, driven by the popularity of its logo T-shirts. After revamping its womens line, sales climbed 29% to $1.6 billion. The single best thing the company has done is to try and diversify the portfolio so theyre not so dependent on mens, says Craig Johnson, president of retail consulting firm Customer Growth Partners. If you look at where the growth in the denim market is, its very heavily on the womens side. According to NPD Group, sales of womens jeans increased 9% in the twelve months ending July 2018, outpacing the 5% sales increase for the overall denim market.
Levis relaunched its womens line in 2015 with a number of new styles and a four-way stretch fabric designed for comfort. Customers took notice. In 2016, Kylie Jenner posed on Instagram wearing a pair of Levis Wedgie Fit jeans. In 2017, Beyoncé wore a pair of its cutoff jean shorts during a performance at Coachella.
The relaunch was, in part, an attempt to address the rise of athleisure offerings from companies like Lululemon and Athleta that were eating into its business. It drives me crazy that women wear yoga pants to nice restaurantsdenim would look so much better. But theyre choosing athleisure because its more comfortable, wrote CEO Chip Bergh in a 2018 essay for the Harvard Business Review.
Despite the push to diversify its offerings, the retailer is still primarily in the business of selling mens pants. In 2018, 69% of its revenue came from its mens business, which was down from 80% in 2011. Its 501 line of mens jeans, which was the very first style it ever sold back in 1890, remains the companys top seller. It also makes Dockers, the popular line of mens khakis that helped establish casual Fridays.
Bergh, who took the top job at Levis in 2011 after nearly three decades at Procter & Gamble, has also bolstered the companys marketing initiatives. When I arrived, we were spending more on interest payments than on advertising, which makes it difficult to grow a brand, wrote Bergh in the Harvard Business Review. (The company had nearly $2 billion in debt on its balance sheet from a leveraged buyout in the 1980s.) The CEO began to increase its TV and digital advertising, plus partnered with social media influencers who were capable of reaching a younger audience. In 2013, it put its name on the San Francisco 49ers stadium, which hosted the Super Bowl in 2016.
In 2018, the company recorded net income of $283 million. Revenue rose 14% to $5.6 billion. That is up from net income of $135 million on revenue of $4.8 billion in 2011. The company has also paid down some $1 billion in debt since 2011.
The San Francisco-based company priced its shares at $17 apiece on Wednesday evening, above the expected range of $14 and $16, which values the company at $6.6 billion. It is expected to raise over $600 million in its public debut. The Haas family, made up of descendants of the founder, will receive the majority of the proceeds.
This is something of a liquidity event for them, says Claire McCardell, a senior research analyst at Renaissance Capital, a provider of institutional IPO research. However, the family will continue to control voting rights through a dual-class share structure that will give them 10 votes per share, as opposed to one vote per share for regular investors.
This is Levis second stint on the public markets. The company, which was started by Bavarian immigrant Levi Strauss in 1853 as a wholesale dry goods business and patented the use of metal rivets to reinforce the seams in work pants, went public for the first time in 1971. Then, in 1985, it was taken private by the Haas family in a leveraged buyout.
In a tough retail environment, few companies have ventured to go public. Retailers have struggled to stay on top of changing consumer preferences and compete in a world that has gravitated toward online shopping. Two of the most recent public debuts in the space are Canada Goose and Stitch Fix, which have gone public in the last two years and have been well-received by investors, with shares rising 200% and 100%, respectively. However, womens apparel brand J.Jill hasnt fared as well, with shares dropping 55% since its IPO in 2017.
Other retailers have gotten cold feet. Neiman Marcus called its IPO off in January 2017, nearly two years after filing its initial paperwork. Revolve, an online apparel company based in Los Angeles, filed paperwork for an IPO in September 2018 but has yet to go public.
Levi's is expected to begin trading on Thursday under the ticker LEVI on the New York Stock Exchange. The trading floor will suspend its no-jeans policy for the day.
Levi Strauss, one of Americas oldest companies and the inventor of the blue jean, will begin its second stint as a public company on Thursday.
Levis, which got its start during Californias gold rush and built a reputation as a purveyor of sturdy mens jeans, has made a comeback in recent years. Under new leadership, the 165-year-old company has reduced a crushing debt load, ramped up its marketing and invested in different product categories.
Tops and womens jeans are now the fastest-growing parts of its business. In 2018, revenue from its tops grew 38% to $1.1 billion, driven by the popularity of its logo T-shirts. After revamping its womens line, sales climbed 29% to $1.6 billion. The single best thing the company has done is to try and diversify the portfolio so theyre not so dependent on mens, says Craig Johnson, president of retail consulting firm Customer Growth Partners. If you look at where the growth in the denim market is, its very heavily on the womens side. According to NPD Group, sales of womens jeans increased 9% in the twelve months ending July 2018, outpacing the 5% sales increase for the overall denim market.
Levis relaunched its womens line in 2015 with a number of new styles and a four-way stretch fabric designed for comfort. Customers took notice. In 2016, Kylie Jenner posed on Instagram wearing a pair of Levis Wedgie Fit jeans. In 2017, Beyoncé wore a pair of its cutoff jean shorts during a performance at Coachella.
The relaunch was, in part, an attempt to address the rise of athleisure offerings from companies like Lululemon and Athleta that were eating into its business. It drives me crazy that women wear yoga pants to nice restaurantsdenim would look so much better. But theyre choosing athleisure because its more comfortable, wrote CEO Chip Bergh in a 2018 essay for the Harvard Business Review.
Despite the push to diversify its offerings, the retailer is still primarily in the business of selling mens pants. In 2018, 69% of its revenue came from its mens business, which was down from 80% in 2011. Its 501 line of mens jeans, which was the very first style it ever sold back in 1890, remains the companys top seller. It also makes Dockers, the popular line of mens khakis that helped establish casual Fridays.
Bergh, who took the top job at Levis in 2011 after nearly three decades at Procter & Gamble, has also bolstered the companys marketing initiatives. When I arrived, we were spending more on interest payments than on advertising, which makes it difficult to grow a brand, wrote Bergh in the Harvard Business Review. (The company had nearly $2 billion in debt on its balance sheet from a leveraged buyout in the 1980s.) The CEO began to increase its TV and digital advertising, plus partnered with social media influencers who were capable of reaching a younger audience. In 2013, it put its name on the San Francisco 49ers stadium, which hosted the Super Bowl in 2016.
In 2018, the company recorded net income of $283 million. Revenue rose 14% to $5.6 billion. That is up from net income of $135 million on revenue of $4.8 billion in 2011. The company has also paid down some $1 billion in debt since 2011.
The San Francisco-based company priced its shares at $17 apiece on Wednesday evening, above the expected range of $14 and $16, which values the company at $6.6 billion. It is expected to raise over $600 million in its public debut. The Haas family, made up of descendants of the founder, will receive the majority of the proceeds.
This is something of a liquidity event for them, says Claire McCardell, a senior research analyst at Renaissance Capital, a provider of institutional IPO research. However, the family will continue to control voting rights through a dual-class share structure that will give them 10 votes per share, as opposed to one vote per share for regular investors.
This is Levis second stint on the public markets. The company, which was started by Bavarian immigrant Levi Strauss in 1853 as a wholesale dry goods business and patented the use of metal rivets to reinforce the seams in work pants, went public for the first time in 1971. Then, in 1985, it was taken private by the Haas family in a leveraged buyout.
In a tough retail environment, few companies have ventured to go public. Retailers have struggled to stay on top of changing consumer preferences and compete in a world that has gravitated toward online shopping. Two of the most recent public debuts in the space are Canada Goose and Stitch Fix, which have gone public in the last two years and have been well-received by investors, with shares rising 200% and 100%, respectively. However, womens apparel brand J.Jill hasnt fared as well, with shares dropping 55% since its IPO in 2017.
Other retailers have gotten cold feet. Neiman Marcus called its IPO off in January 2017, nearly two years after filing its initial paperwork. Revolve, an online apparel company based in Los Angeles, filed paperwork for an IPO in September 2018 but has yet to go public.
Levi's is expected to begin trading on Thursday under the ticker LEVI on the New York Stock Exchange. The trading floor will suspend its no-jeans policy for the day.