Levi Strauss shares surge 31% in return to bourse

Levi Strauss' chief executive and president Chip Bergh ringing the bell on the trading floor of the New York Stock Exchange on Thursday. Its initial public offering was priced at US$17, above the expected range, in an oversubscribed offering. By Thur
Levi Strauss' chief executive and president Chip Bergh ringing the bell on the trading floor of the New York Stock Exchange on Thursday. Its initial public offering was priced at US$17, above the expected range, in an oversubscribed offering. By Thursday afternoon, the shares had hit a high of US$23.15.PHOTO: REUTERS

BENGALURU • Shares in Levi Strauss & Co surged 31 per cent in their debut on Thursday, giving the jeans maker a market value of US$8.7 billion (S$11.8 billion) and suggesting strong investor appetite before much-awaited listings from Lyft and Uber.

The 165-year-old US company's return to the public market comes at a time when stocks are near all-time highs and the popularity of denim is surging, driven by the resurgence of 1990s-era styles such as high-waist and pinstriped jeans.

"I'm not going to live or die by what the stock does day in and day out," chief executive and president Chip Bergh said in a phone interview. "We're here to run the business for the long term. It is humbling that the stock was so well received. That is pretty awesome."

The self-proclaimed inventor of blue jeans has grown to become one of the world's most recognised denim brands.

Levi Strauss hopes to use a part of the proceeds from the initial public offering (IPO) to expand in emerging markets such as Brazil, China and India.

"Denim continues to prove prevalent in streetwear and on the runway, so we're not expecting it to go anywhere anytime soon," an analyst at retail analytics firm Edited said. "That's why now is a great time for Levi's to capitalise on this momentum."

Levi's accounted for 5 per cent of the global jeans market last year, according to market research firm Euromonitor. The market has remained flat from 2013 to 2018, but is expected to grow at a compound annual rate of 2 per cent until 2023 if prices remain at 2018 levels.

Going forward, Mr Bergh said, Levi Strauss can double its business in Asia in the next couple of years "and then double it again".

Levi Strauss does not disclose its earnings in China but Mr Bergh said that market makes up around a quarter of its total Asia business, which had just over US$800 million in revenue last year.

Levi Strauss first went public in 1971 when it sold 1.27 million shares at US$47 each and the stock opened at US$60, according to a New York Times report. After 14 years, it was taken private by the Haas family, the descendants of founder Levi Strauss, in a US$1.6 billion leveraged buyout.

Its second IPO was priced at US$17, above the expected range, in an oversubscribed offering. By Thursday afternoon, the shares had hit a high of US$23.15.

Levi Strauss' market splash marks the start of what could be a blockbuster year for IPOs with several high-profile firms expected to list their shares.

Ride-hailing service provider Lyft kicked off the investor roadshow for its market debut on Monday, while larger rival Uber is expected to go public next month. The line-up also includes photo-posting app Pinterest and business messaging app Slack.

The Haas family will retain 80 per cent voting control of the public company, according to Mr Bergh.

He said a desire among existing shareholders to diversify, coupled with a strong corporate performance and supportive market conditions, led to the decision to go public this year.

"The market is pretty ripe and we're the first big IPO of the year," he said. "There was a lot of pent-up demand because it's been pretty slow the last couple of months and that was also probably a tailwind for us."

The company's US$8.7 billion market capitalisation at the start of trading is based on outstanding shares of about 390 million, including the over-allotment option.

"There is a lot to like when it comes to Levi Strauss the brand and its outlook moving forward," said Mr Jeff Zell, senior research analyst and partner at IPO tracking firm, IPO Boutique.

"The company and the underwriters targeted a reasonable valuation to start with and allowed the true investor demand to dictate price, which ultimately came to one dollar above range."

Levi Strauss' revenue rose 14 per cent to US$5.6 billion last year, the bulk of which came from men's denim. Its biggest market is the Americas, accounting for 55 per cent of overall revenue.

The San Francisco-based company sells in 110 countries through 50,000 retail stores, and its rivals include Gap and VF Corp's Lee and Wrangler brands.

To attract young customers, Levi Strauss is planning to expand its tailor shop and print bar that allow consumers to customise and put their own designs on the company's branded jeans and T-shirts.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 23, 2019, with the headline 'Levi Strauss shares surge 31% in return to bourse'. Print Edition | Subscribe