Levi’s Surges in Wall Street Return
The NYSE relaxed its no-denim policy for the session, for which the opening bell was rung by jeans-clad executives from the San Francisco-based company. Levi’s, which went private in 1985, had raised $623 million in an initial public offering that priced above its initial target price. First founded in 1853 in San Francisco as a wholesale dry goods business, Levi’s invented the blue jean 20 years later, a product that was initially worn by primarily by miners and cowboys before becoming ubiquitous in the 20th century. Listing under the ticker symbol “LEVI,” shares of Levi Strauss & Co. surged in opening trade before finishing at $22.41, up nearly 32 percent above its IPO price.
The brand has since had its ups and downs in terms of its cultural relevance but has been seen as again rising under Chief Executive Charles Bergh, who joined Levi’s in September 2011 after a lengthy stint at Procter & Gamble. Most recently, Levi’s won attention when musical superstar Beyonce wore Levi’s cutoff shorts in an April 2017 performance at the Coachella music festival, a point highlighted in the company’s securities filing, which noted the garment was deemed the “ultimate Coachella clothing item” by People magazine.
“Reboot Public Offering” seemed to be a more fitting classification for @levis 👉🏾 Levi’s first went public in 1971, one of the largest IPOs at the time. Strauss’ descendants the took the company private in 1984. They re-emerge today on Wall Street and $LEVI closes 🔼32% … pic.twitter.com/m2ldihlh0d
— Brad Smith (@thebradsmith) March 22, 2019
Bergh told CNBC that the brand faced a “throw-down moment” in the 2014 period as surging demand for soft “athleisure” pants took market share, especially among women. The company brought staff from denim mills into its technology development center in San Francisco to address the problem. “We understood what women were telling us: wearing tights, that used to be a denim occasion,” Bergh told the network. “They wanted soft, stretchy, comfortable material that made them look great and gave them confidence.”
Engineers developed a more comfortable fabric and one that does not give women “baggy knees, which is their biggest disatisfier,” and this produced strong sales, Bergh said. The return to public markets comes as apparel brands face continual churn in the retail landscape in the Amazon era.
Just last month, 50-year-old US retailer Gap, which also sells jeans, announced it was splitting into two companies to emphasize its trendy “Old Navy” brand and deemphasize stores under its namesake company. Like other major brands such as Nike and Ralph Lauren, Levi’s has sought to make itself present at all major customer meeting points: Amazon and other online vendors; department stores such as Bloomingdale’s; and direct selling, whether at its own retail stores or online. Bergh told CNBC he planned to use some of the proceeds from the offering to enhance the company’s e-commerce business, build out its brick-and-mortar presence and in general for “continued investment in building out our omnichannel footprint.”
In a securities filing, Levi’s also emphasized potential growth in China and other emerging markets. Of Levi’s $5.6 billion in 2018 revenues, more than half came from the Americas, while 29 percent came from Europe and just 16 percent from its “Asia” segment, which also includes the Middle East and Africa.
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Levi’s said in the filing that China represents 20 percent of the global apparel market but just three percent of its revenues, a potential growth market for which the company recent tapped a new management team. However, the filing also highlighted “a global trade war” as a risk, citing tariffs imposed by US President Donald Trump on several partners, including China and the European Union, which imposed reciprocal tariffs, including on denim products.
The IPO had been seen as a key barometer of investor interest in new issues ahead of much bigger offerings expected in the coming period from Lyft, Uber and others. “Had Levi’s IPO been a dud, that would have only played into the hesitancy that investors and companies looking to go public had been feeling,” said Briefing.com. “Fortunately, that was not the case: pent-up demand for higher-quality IPOs helped to draw a lot of interest.”
