Levi Strauss Roils Apparel Industry With IPO Announcement
Paperwork for the IPO was filed with an initial offering size of $100 million.
(Bloomberg) -- Levi Strauss & Co. filed for a public offering -- a sign the iconic maker of denim pants and jackets is betting it can overcome growing competition in the apparel industry.
It filed paperwork with an initial offering size of $100 million, a placeholder amount that’s used to calculate fees and will typically change. CNBC reported that the denim maker is looking to raise $600 million to $800 million. The company’s ticker would be LEVI.
The company, whose blue jeans earned a patent in 1873, intends to use the proceeds from an IPO for “general corporate purposes, including working capital and capital expenditures.” Levi may also use the cash for “acquisitions or other strategic investments, although we do not currently have any plans to do so.”
The IPO would be led by Goldman Sachs & Co., Morgan Stanley and JPMorgan Chase & Co.
The announcement roiled the shares of apparel companies, with American Eagle Outfitters Inc., Gap Inc. and Urban Outfitters Inc. all falling sharply.
Levi’s Bets Blue Jeans Can Outlast Retailer Blues: IPO Tearsheet
Levi Strauss is looking to tap the market at time of increased competition for the denim industry. Consumers are buying more athletic apparel -- and that has eaten into the cash they spend on jeans. Still, demand for denim has improved recently, according to Bloomberg Intelligence analyst Chen Grazutis.
‘Steady’ Growth
The denim market “is better than a couple of years ago,” said Chen Grazutis, an analyst for Bloomberg Intelligence. “It’s steady, with low-single digit growth.”
The San Francisco-based company has been expanding overseas, with 45 percent of its sales now coming from outside the Americas. Its revenue hit $5.6 billion in its year ended November 2018, putting it about on par with Harley-Davidson Inc. -- another recognizable U.S. company -- in terms of size.
Levi Strauss sees a “significant opportunity” to boost its presence in emerging markets such as China, India and Brazil. China represents roughly 20 percent of the global apparel market, but only represented 3 percent of Levi’s revenues, according to its filing.
The company is very reliant on wholesale channels, with almost two thirds of its revenue in 2018 coming from there. But its diverse customer base, where no vendor accounts for more than 10 percent, may be seen as a strength by investors.
According to the filings, the company sees opportunity for growth in women’s apparel and tops.
“A lot of their opportunities are outside of denim, bringing the brand to other categories as well,” Grazutis said.
--With assistance from Elizabeth Fournier and Kim Bhasin.
To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net
To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder
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