How will Levi’s IPO affect its future business?

28 Mar 2019
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Levi Strauss & Co. has gone public for the second time since its first attempt over 30 years ago, from1971 to 1985.

On the 13th of February, the San Fransisco retailer filed for a proposed Initial Public Offering (IPO) of shares on the New York Stock Exchange (NYSE) under the ticker “LEVI”.

According to a press release of the company, on the 20th of March, the IPO pricing of the 36,666,667 shares of its Class A common stock was announced to be $17,00 per share, therefore determining their market value at $6.6 billion. It is reported that $623 million in shares were sold on Wednesday, before the trading commencement on the 21st of March. Despite, the earlier indications they started trading at $22.22 per share, generating a valuation above $8 billion.

The company plans to use the investments for general business benefits, such as operating costs, working capital and capital spending; and possibly, for further strategic investments; focusing on the development of the company.

Levi’s Commitment to Sustainability

Levi Strauss & Co. is one of the pioneers in the denim field regarding innovation in sustainability and has been proud and vocal about it. Levi’s founded Eureka Innovation Lab in 2013, with the aim to “redefine the future in jeans-wear” says Bart Sights, VP of Technical Innovation. The lab is focused on design, research and creative development. It is where the retailer’s experts realise their ideas and develop significant sustainability initiatives, such as their collaboration with I:Collect (I:CO) on a garment recycling initiative, the Water<Less™ process and more recently the F.L.X. finishing (Future-Led Execution) technology.

Fashioned from Nature

Post-IPO Operations

With the company becoming public and having external shareholders involved, naturally, changes are expected. Levi’s will be required to disclose a lot more information to its investors and the public. Stakeholders will be monitoring closely the performance of the company and will be expecting regular updates and results.

The company will possibly attempt to convince potential investors by demonstrating its dominant market position in sustainability, innovations, as well as its omni-channel strategy to merge its online and offline operations, in order to be in line with competitors. Levi’s decision to return to the public market was a bold move. Will it be proven to have been a smart one?

If Levi’s decides to broaden its focus further from denim it will have to face many competitors. On the other hand, if the company tries expanding to other markets, such as China, in which it has already approached investors, it could face other risks, like the declining consumer spending in apparel. Furthermore, in its efforts to become more profitable, Levi Strauss & Co. might increase its production, yet, if there is not proportionate increase in demand this might be another case of overproduction leading to further sustainability issues.

In addition to reaching its corporate governance and ethical goals, Levi’s is striving to be a lucrative business. Although, the fashion retail market is struggling and there is substantial competition with online retailers, Levi’s has achieved 18% direct-to-consumer net revenue increase during the last year, which is believed to have been affected by the growth of its online operations.

According to the CEO of Levi Strauss & Co., Charles Bergh, since rejuvenating its business the company has been seeing growth in every category. Mr. Bergh is confident of their operations and being a leader of the denim sector. In addition, he expressed the company’s devotion and openness to transparency by stating that “I like to say we’ve been in training to become a publicly traded company for a long time”.

Taking into consideration the retailer’s confidence, as well as the development and the positive progress in the last few years, but also the investors’ interest, the future of Levi’s looks promising.

The company has many unexplored opportunities such as tapping into new markets, becoming a principal omni-channel retailer and incorporating technology into its supply chain, therefore, it is safe to say that the growth possibilities are endless, but so are the risks. Will Levi’s IPO be an opportunity or a threat to the company’s innovation in sustainability efforts?