Clothing Brands Have Fallen To The Altar, Why Can Levi'S "Counterattack" Return To The Capital Market?

Recently, the Levi's Levi Strauss & Co, which made the jeans, once again landed in the NYSE thirty-four years later, plans to raise $587 million to expand the product category, which will bring the company up to $6 billion 170 million valuation.


According to the announcement, the company has 385 million 500 thousand tradable shares and is expected to offer 36 million 700 thousand shares, priced between 14 and 16 dollars per share. The Hass family, the descendant of founder Levi (Levi's Strauss), will retain 80% of the company's voting rights after IPO.


As the originator of jeans, today's Levi's product line has been dabbling in casual and formal trousers, jackets, shorts, skirts, jackets, footwear and related accessories, including Levi's, Dockers, Leign TRUS & Co, and many other clothing brands.


The announcement shows that as of November 25, 2018, Levi's has created a net income of $5 billion 600 million in more than 110 countries, including 50000 stores in the world, including 3000 stores (including shop outlets).


North America is still a major market for Levi's. Currently, it occupies 55% of its share, followed by 29% and 16% in Europe and the Asia Pacific market. Levi's is very optimistic about the opportunities in the Chinese market. At present, its business accounts for only 3% of China's business. It is good at using popular culture to attract young people's marketing plan to give them the confidence to gain a bigger share in the Chinese market.


In addition, only 4% of the revenue from e-commerce channels, Levi's believes that the potential of electricity providers is huge.


Levi's's centenary history


Levi's is a real family business. The founder is a Jewish immigrant from Germany. In the period of gold rush in California, the founder of Levi Strauss just wanted to make more durable and durable work clothes for people who work hard. They did not think that jeans became a symbol of popular culture in the following 160 years.


In 1902, after the death of the founder of Levi Strauss, there was no offspring, and the inheritance was inherited by four nephews. One of the nephew's daughters married the German Jewish fellow Walter A. Haas. The Walter A. Haas became the chairman and President of Levi's. This is the origin of the famous Haas family's control of Levi's.


In 1971, Levi's first landed in the capital market and publicly raised $50 million, creating the largest record of IPO fundraising in the history of the United States.


However, in the mid and late 80s, men in the United States changed their suits and trousers in the office, while women were more willing to dress up in soft and comfortable clothes. Under the overall downturn of the market, the clothing giant in "cowboy tradition" is hard to compete with the richer brands. Even if jeans are bought, consumers will prefer cheap brands such as Zara and H&M.


This eventually led to Levi's's performance and share price plummeting. In 1984, the Haas family finally pulled out the privatization of Levi's with $1 billion 700 million, and bought the remaining shares from the employees and external investors in 1996 by using bank leverage. At this point, Levi's became a private asset of the Haas family. So far, the Haas family still holds the voting power of Levi's 80%, and the top six shareholders are from the Haas family.


After delisting, Levi's spanformed itself into a low-end brand with low price as a competitive advantage by expanding wholesale channels and reducing production costs. This strategy did reverse the Levi's's sluggish performance, but the loss of the brand premium was a bit big, and Levi's's performance soon declined again.


Until 2003, as the scale of debt continued to expand, Levi's was once on the verge of bankruptcy. In the same year, Levi's shut down more than 60 factories in the United States, cut nearly 2000 employees and spanformed into a light asset company. It was also during this period that Levi's was once scandalous. The jeans labeled "American made" were actually produced at cheaper cost in China, prompting Levi's to further change its strategy.


After a period of dismal operation, Levi's's board of directors invited Chip Bergh, who had worked in Procter & Gamble for 28 years in 2011, to become CEO. It is the marketing champion who has made a great effort to build up nearly $2 billion Gillette brand, and this time he has put Levi's on the track of growth again.


Marketing of Levi's


From low performance to nearly $6 billion in revenue in 2018, Levi's's comeback is a worthwhile research sample. How to find a new market breakthrough in desperation is probably the secret of Levi's's brand for 165 years.


After Chip Bergh took office from Procter & Gamble, he made drastic reforms to Levi's. Reduce supply chain costs, increase design research and development, vigorously develop new categories such as women's wear and accessories, and increase investment in marketing and DTC (Direct To Consumer).


In the clothing industry, the gross margin is maintained at 30-50%. From the recent five years' financial data disclosed by Levi's, Levi's's gross profit has been maintained at more than 50%, mainly due to lowering the cost of production and retail links. The production cost of clothing affects the gross margin of the company to a certain extent. What Levi's can do is to lay off the workforce as most enterprises do.


Layoffs at the same time, Levi's set up Eureka laboratory, mainly for new technology and new ideas development and testing, a total of 30 employees, they used different colors, patterns, chemical reagents to test, each week can produce 20 samples, for example, the completion of a pair of jeans only 90 seconds of stereotyping, greatly improving the production efficiency and product categories.


This small department is particularly valued by Chip because it focuses on two areas: product design and marketing to rebuild the global consumer's stereotype of Levi's as a cheap brand.


Although the clothing market is no longer a world of jeans, Levi's has equated jeans with fashion, technology and popular culture with its high marketing costs.


In the prospectus, Levi's did not conceal the marketing cost in the past few years. Since 2013, Levi's has been improving its brand influence through cross-border cooperation with sports and entertainment stars.


In 2013, Levi's won the title of the new stadium of the 49 San Francisco team. The super bowl of 2016 was held in Levi's Stadium, becoming one of the most watched programs in the history of American television.


Levi's cutoff shorts worn by Beyonc ye on the Coachella Music Festival were fry as the "ultimate Coachella clothing project" by the media. Now, at the Coachella Music Festival, girls wearing jeans shorts has become a standard scenic spot.


In addition, the CoBranding between brands is also indispensable. Levi's's joint Nike Air Jordan brand has issued a joint name, and the cooperation with singer superstar Justin Timblerlake has greatly increased Levi's's brand exposure.


Levi's's cross-border cooperation also touches on technology companies. In December 9, 2018, Levi's also launched a smart jacket called Jacquard with Google. The intelligent module added in Jacquard can provide automatic reminder. As long as the cell phone is in the connection range, the mobile phone will exhale and vibrate through the module to exhale the mobile phone's retrieval mode, so that it can be retrieved easily.


In the future, Levi's will continue to exert its strength in women's clothing business. In fiscal 2018 and fiscal year 2017, the net income of Levi's's women's clothing business increased by 29% and 25% compared to the same period last year, reaching 1 billion 600 million US dollars in the 2018 fiscal year.


In addition, Levi's will also focus its attention on the higher profit footwear, accessories and other product lines. In the 2018 fiscal year, these two businesses account for only 6% of net income, and there is still much room for growth.


In international business, the big cake in the Chinese market will not be abandoned. In 2018, China accounted for 20% of the global clothing market, while Levi's made only 3% of its revenue from the Chinese market. As Levi's pointed out in the prospectus, "I hope to develop into a global leading brand of lifestyle for men and women".


However, some analysts have questioned Levi's's business model. The founder of Levi's started the wholesale business to serve the laboring people, and this market strategy rose to a company strategy within Levi's, and realized the main revenue through the wholesale of third party retailers.


In 2018, 65% of Levi's's revenue came from traditional wholesale channels such as WAL-MART, Amazon, Taghit, Messi and so on. However, most of the traditional department stores are facing the risk of large-scale closure, which is a big worry for Levi's's retail market.