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After Much Speculation, Levi Strauss Files for IPO

The suspense is over–Levi Strauss & Co. is going public.

The San Francisco jeans giant made it official by filing a registration statement Wednesday with the U.S. Securities and Exchange Commission (SEC) relating to a proposed initial public offering (IPO) of shares of its Class A common stock.

The company said the number of shares to be offered and the price range for the proposed offering have not yet been determined. Levi Strauss said it intends to list its Class A common stock on the New York Stock Exchange under the ticker symbol “LEVI.”

In November, several media outlets reported that the company was planning an IPO again and was hoping to raise between $400 million to $800 million. The company last completed an IPO in 1971, but has been a private company for quite some time. It had been reporting its quarterly financial results because it has public debt.

Seeking Alpha news editor Clark Schultz wrote that Levi’s filing “will be a highly-anticipated IPO in the retail sector.”

In its SEC filing, the 165-year-old company said, “We expect to opportunistically pursue acquisitions to supplement our strong organic growth profile and drive further brand and category diversification.”

The company also said it is “targeting value-conscious consumers through our Signature by Levi Strauss & Co. and Denizen brands, which are sold through wholesale accounts.”

“We continue to grow our business with accounts such as Walmart and Target by expanding our offering within existing doors and leveraging our relationships with these retailers to launch our value brands in international markets,” the SEC filing said. “In fiscal year 2018 and in fiscal year 2017, net revenues from these brands increased 28 percent and 21, respectively, year-over-year.”

In recent conference call with analysts, president and CEO Chip Berg said, the Levi’s brand “continued its momentum and maintained its position at the center of culture,” with 13 percent revenue growth in 2018 after delivering 9 percent growth in 2017. Overall company net revenue for the fourth quarter ended Nov. 25 grew 9 percent to $1.59 billion. For the year, net revenue increased 14 percent to $5.58 billion.

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The Levi’s strategy to grow its profitable core business while becoming “a leading omnichannel retailer,” according to Bergh, continues to pay off. In the core business, total men’s bottoms—the biggest area—was up 3 percent for the year, he noted.

Levi’s designs and markets jeans, casual wear and related accessories for men, women and children under the Levi’s, Dockers, Signature by Levi Strauss & Co., and Denizen brands. Its products are sold in more than 110 countries through a combination of chain retailers, department stores, online sites and a global footprint of approximately 3,000 brand-dedicated stores and shop-in-shops.

“Our top 10 wholesale customers grew 10 percent for the year,” Bergh said as evidence of the brand strength. “U.S. revenues were up 8 percent, and our next four largest markets grew 10 percent collectively.”

Net revenue for the fourth quarter ended Nov. 25 grew 9 percent to $1.59 billion from $1.47 billion in the year-ago period. In the Americas, net revenues were up 8 percent to $923 million, reflecting higher revenues across wholesale and direct-to-consumer channels.

The company reported that direct-to-consumer business grew 16 percent for the year, with Bergh noting that it has now grown in double-digit percentages for 11 consecutive quarters. He cited the new flagship store in New York’s Times Square, which is the largest Levi’s mainline store in the world, as major achievement. “It’s an incredible shopping experience and it is far outperforming our previous Times Square location,” he said.

Fourth quarter net income declined 17 percent to $97 million from $116 million in the prior-year quarter, primarily due to a tax charge related to the impact of the Tax Cuts and Jobs Act. Full-year net income was flat, as higher operating income, lower interest expenses, gains on hedging contracts in the current year and a debt refinancing charge in the prior year were partially offset by a one-time $143 million tax charge related to the Tax Act.

Fourth quarter adjusted earnings before interest and taxes (EBIT) was down 18 percent to $129 million compared to $157 million in the prior-year period, as higher revenues were more than offset by higher costs related to the expansion of the company’s direct-to-consumer business, higher compensation expense reflecting stronger company performance and increased advertising investments.

Full year adjusted EBIT increased 13 percent to $542 million from $481 million in fiscal 2017.

Credits ratings firm Fitch Ratings recently upgraded the company’s long-term issuer default rating. The upgrade has the rating now at “BB+” from “BB,” With a stable outlook.

The proposed offering will be made by means of a prospectus. Goldman Sachs & Co. and J.P. Morgan Securities will serve as lead joint book-running managers for the offering. BofA Merrill Lynch, Morgan Stanley & Co. and Evercore Group will serve as book-running managers. BNP Paribas Securities Corp., Citigroup Global Markets Inc., Drexel Hamilton LLC, Guggenheim Securities, HSBC Securities (USA) Inc., Telsey Advisory Group and The Williams Capital Group will serve as co-managers.