Why Is Levi'S Levi 'S Worth 8 Billion US Dollars?

On Thursday morning, Levi Strauss & Co. launched a cowboy boom on the New York stock exchange. Its initial public offering (IPO) traded at $22 per share (about 150 yuan), much higher than expected.

The blue jeans maker gained $8 billion 100 million (about 54 billion yuan) in the new market value (30% higher than the company's own estimate), plans to open new stores, develop fabric technology, provide customers with more customization points, and improve e-commerce experience.

The company, whose stock code is "LEVI", has estimated that the initial public offering (IPO) price as of Wednesday night will be $17 per share (about 115 yuan).

But after Thursday's opening, the figure slowly climbed, making the trading hall noisy.

The stock closed at $22.41 on Thursday afternoon (about 150 yuan).

Levi, s's chief executive, Charles "Chip" Bergh, told BoF: "I try not to get too excited about myself.

This is not the first or thirtieth day stock trading.

We will become a listed company for a long time, which is related to the continuous growth of our turnover, and this will drive up share prices over time.

As the NYSE temporarily lifted the ban on jeans, the festive atmosphere was more intense.

The 400 traders and the staff of the stock exchange did not wear the navy blue jacket that they were wearing, but wrapped various shades of blue denim from head to toe.

They wear tailored clothing and even have the opportunity to customize truck driver jackets, which are provided by Levi s.

By 2019, demand for initial public offerings (IPO) remained strong, even in the fashion world.

Levi 's follows the footsteps of Farfetch, a luxury electronics retailer based in London, who launched a heated reaction in September last year on the New York stock exchange.

Another US based electronics retailer, Revolve, applied for initial public offerings (IPO) in October last year, but it has not yet been completed.

This is related to the continuous growth of our turnover, and this will drive up share prices over time.

This is not the first time Levi 's has been listed on the exchange.

The company went public in 1971 and continued until 1985, and the Strauss family once again privatized it.

Despite its rapid growth in 1990s, the brand has stagnated for the next 10 years due to competition from fast fashion retailers and the rise of yoga pants.

But under the leadership of Bergh (seven years ago from Procter & Gamble to Levi 's), Levi s has been growing for 11 consecutive quarters in the United States.

Last year, the company reported revenue growth of 14%, reaching US $5 billion 600 million (about 38 billion yuan) and net income of US $283 million (about 2 billion yuan).

The outstanding debt dropped from $1 billion 970 million in 2011 (about 13 billion yuan) to 1 billion 50 million yuan (about 7 billion yuan).

Its strategy of turning losses into win has achieved remarkable results: it has enhanced the brand awareness of Levi s in all consumers' minds, and reshaped its status as a classic American brand.

The great success of IPO on Thursday proved this.

On Thursday, Bergh told BoF: "business has not been done so well for more than 40 years.

Strong prices do show investors are very interested in this brand and our business performance. "

In 2011, when Bergh joined Levi 's, the brand had lost its cultural significance.

In response to the recession, he began investing in product innovation.

In 2013, he hired Karyn Hillman as chief product officer.

Since then, Hillman has improved the design of women's products with modern characteristics and improved the sales share of non cowboy products.

(for cowboy products, sales in the past year are also heating up).

According to the company's chief marketing officer, Jen Sey, sales of women's tops increased by two digits in the past few years, driven by T-shirt and truck driver jackets.

"In addition to these product categories, we see a lot of opportunities," she said on Thursday.

In order to counter the trend of sports and leisure which sprang up in the early 2010s, the brand drew inspiration from this shape and feeling and created a new style.

"We went out to talk to consumers and asked them," Why are you wearing tight pants for brunch on Sunday?

What is the way to wear this?

And it's really a sense of comfort, "Sey said.

"Therefore, we did not say that we would enter the field of sports and leisure, but rather try to borrow comfort to answer this question - making jeans with softer and better elasticity."

Business has not been done so well for more than 40 years.

The brand has been investing heavily in a laser technology called F.L.X..

(F.L.X, Future-Led Execution, means "future oriented innovation").

The technology uses laser to treat jeans.

Bart Sights, vice president of technological innovation at the Levi 's Eureka innovation lab, created by Bergh, said that the traditional jeans production process has more than 20 channels, using frosted technology, thousands of chemicals, and a lot of water.

With laser, this process saves a lot of manual labor and almost all chemicals.

F.L.X. was first tested last year and will be open to all customers online this fall.

Under the leadership of Bergh, Levi 's has also been developing rapidly to the consumer directly. It has increased to about 1/3 of total sales through two channels, namely e-commerce and retail stores.

Levi 's operates 800 stores and outlets in the world, but there are only 30 traditional stores in the United States, and the brand plans to open more stores in the United States later this year.

At the same time, the annual growth rate of e-commerce has been maintained at around 20%.

Sey said that by promoting direct sales of these two channels, the volume of direct sales to consumers may increase to 50% of total sales in the short term.

Many retail outlets of the brand have tailoring shops catering to the personalized preferences of millennial generation and Z generation consumers, allowing customers to add patches, pins and chain embroidery patches.

For example, Levi s has four field tailors in the new store in Times Square in New York, and also provides T-shirt printing services.

"Whether they buy it on our website or eventually go to a wholesale partner or a retail store, I am a bit ambivalent," Bergh said.

But I hope they first think about our website, and I hope that shopping experience is amazing.

Levi 's's wholesale partner network includes Kohl' s, Urban Outfitters, Zalando and Saks Fifth Avenue.

Winning fashion prestige is another winning point of Levi 's, which has cooperation with brands such as Off-White and Re/Done.

Levi 's has launched loose waist jeans for a long time.

Its Wedgie series jeans originate from consumers' demand for non resilient retro jeans.

In 2016, Levi 's added modern elements to the jeans and made a large scale production as a new style, and then got the recognition of Kylie Jenner on Instagram.

(Levi) s has now become the star's meat and cake, and has been favored by Beyonc and Kardashian-Jenner members.

Analysts say that the price point of Levi 's has contributed to its success.

The price of a 501 pair of jeans is 98 yuan (about 660 yuan), although it is more expensive than H&M jeans, but compared with high-end brands such as Current/Elliot and Rag & Bone, it is more affordable.

Bergh said that as part of its initial public offerings (IPO), the company issued 36 million 700 thousand shares, which will largely create value for existing shareholders, but about $150 million (about 1 billion yuan) raised on Thursday will be spent on corporate expenses.

He added: "when we talked with investors, we said we would continue to increase the percentage of investment in projects and plans."

Bergh said: "when I joined the company, our capital expenditure was less than 2% of the revenue, and these capital were mainly used to repair broken items.

This year, we will increase capital expenditure to 3.5%, and most of the expenditure will be used to promote the growth of sales volume: new stores, e-commerce, new technology and new point of sale system.

All of these will continue to drive the growth of the company. "

Author: Cathaleen Chen