After a 34-year absence, Levi Strauss slid back into the public stock market as easily as, yes, putting on an old pair of blue jeans.
Levi Strauss, which retreated from the stock market after going private in 1985, staged the biggest U.S. IPO so far in 2019 when it sold 36.7 million shares priced at $17 a share, above the proposed range of $14-to-$16 a share. Once trading began, Levi Strauss opened at $22.22 a share before closing the day at $22.41 a share, or 32% above its offering price. At that price, Levi Strauss had a market cap of $8.7 billion.
In an apparel industry that is seeing some top brands struggle, Levi Strauss saw its revenue rise 13.7% to $5.6 billion while posting a net profit of 73 cents per diluted share. Three-quarters of that revenue came from pants, mostly the company’s iconic blue jeans, with sales especially strong in overseas markets like China and India.
“We believe we have a significant opportunity to deepen our presence in key emerging markets, such as China, India, and Brazil, to drive long-term growth,” Levi Strauss said in its prospectus, which noted that its sales in the U.S. has grown at a compound rate of 2% a year since 2015, while non-U.S. sales have grown by 13% a year.
Levis Strauss may soon lose its status as the biggest U.S. IPO of the year when ride-sharing companies Lyft and Uber go public. Lyft’s IPO is expected to arrive next week and could value it as high as $23 billion. Uber’s IPO will likely follow a month or so after with its valuation anticipated between $100 million and $120 million.
Founded in 1853, Levi Strauss has struggled at times in recent decades against fashion trends that favored rival jean makers, although the company’s die-hard customers have helped the brand endure. Global jean sales have grown steadily at the gradual rate of about 3.5% a year during the past decade. To surpass that rate, Levi Strauss will not only need to focus on overseas markets, but also other clothing categories.
“They’ve really improved the position of the business,” Michael Zuccaro, a bond analyst at Moody’s told Bloomberg. “Nonetheless, they are still concentrated in pants and men’s jeans, which is still a concern.”