By Aleandro Ortega | firstname.lastname@example.org | StockMarketNews.Today
Levi Strauss & Co., which invented bluejeans and dominated the category for more than a century, is looking to go beyond denim. The company Wednesday filed paperwork for an initial public offering of shares and, according to people familiar with the matter, it hopes to raise more than $600 million. The family-controlled business seeks a total valuation in excess of $3 billion, the people said.
The offering would return Levi to the public markets more than three decades after it went private in a leveraged buyout. It would also give the denim maker a war chest and equity for potential deals. In its IPO filing, Levi said it was looking to make acquisitions that would “drive further brand and category diversification.” The company still gets the majority of its sales from its Levi’s jeans and Dockers khakis.
“Levi has recognized that they need financial flexibility to figure out the next chapter for the brand,” said Joel Bines, a managing director of consulting firm AlixPartners, which isn’t involved in the deal. The San Francisco-based company is still the largest seller of jeans in the world. In the U.S., it has a 12.1% share of the $16.68 billion denim market, dwarfing the next-largest player, Lee and Wrangler parent VF Corp. , which has a 4.8% share, according to Euromonitor International.
Denim growth has stalled in recent years as more people opt for yoga and sweatpants, or premium brands such as Frame and AG Jeans. VF is spinning off its denim brands to focus on faster-growing products such as Vans sneakers and the North Face jackets.
Levi has defied the slump by launching premium labels, expanding overseas and opening its own boutiques where shoppers can get their jeans customized by adding patches, studs and stenciling. “We’re gaining market share as the growth we’re delivering outpaces the category,” Chief Executive Chip Bergh told analysts earlier this month.
The company had teetered on the edge of bankruptcy around 2003, crippled by heavy debt and falling sales. But under Mr. Bergh, a former Procter & Gamble Co. executive who joined the denim maker in 2011, Levi has turned itself around. Revenue totaled $5.6 billion in the most recent fiscal year, which ended Nov. 25, up from $4.8 billion in 2011. Net income over that period more than doubled to $285 million from $135 million. In the most recent quarter, revenue rose 9% to $1.59 billion, but net income fell 17% to $97 million due to changes in the U.S. tax law.
Although Levi is closely held, it files quarterly financial reports because of its publicly traded debt. The company was taken private in 1985 in a leveraged buyout by descendants of the founder Levi Strauss, who in 1853 opened a dry goods store in San Francisco and sold work pants to miners during the California Gold Rush.
The family will retain significant voting power through a dual-class share structure, which has been popular with technology companies such as Facebook Inc. and ride-sharing service Lyft Inc. Levi said it intends to list its class A common stock on the New York Stock Exchange under the symbol LEVI. Levi will seek to convince potential buyers in the IPO that it has a strategy of innovation and can gain ground in e-commerce, people familiar with the offering said.
A number of fashion e-commerce companies are looking at public offerings in the next several quarters, seeking to tap investors’ interest in fast-growing companies with a technology and internet bent. Poshmark Inc. and The RealReal Inc. have both been working with bankers to prepare for IPOs that could come this year, according to people familiar with their respective plans. One such company, Stitch Fix Inc., which made its debut in November 2017, is trading more than 50% above its IPO price.
How to Make Money in Stocks: A Winning System in Good Times and Bad
Anyone Can Learn to Invest in The Stock Market Wisely With This Investment System. Proven 7-step Process For Minimizing Risk and Maximizing Gains. The Ultimate Guide For Make Money in The Stock Market. By SMN.Today – ( Paperback Version )
One challenge for Levi is that two-thirds of sales come from wholesale customers, mainly department stores, a group of retailers that have suffered from sluggish sales and declining foot traffic. As chains such as Macy’s Inc., J.C. Penney Co. and Sears Holdings Corp. have retrenched by closing hundreds of stores in recent years, with some even going out of business, brands such as Levi are looking to lessen their reliance on the channel.
Although Levi has 824 company-owned stores, only 268 of them are in the Americas. Levi’s e-commerce sales represented just 4% of net revenue in its latest fiscal year. For all its reinvention in recent years, Levi still primarily sells denim to men. Sales to women totaled 29% of revenue in the most recent year, while bottoms outsold tops by nearly 4-to-1.