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Levi Strauss Aims to Raise Up to $587 Million from IPO

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Levi Strauss & Co. kicked off its Initial Public Offering (IPO) on Monday, aiming to raise up to $587 million by offering an expected 36.7 million shares priced between $14 and $16 per share.

Based on the 385.5 million shares it has outstanding, according to its filing with the Securities & Exchange Commission (SEC), this would give the jeans and sportswear maker a valuation of up to $6.17 billion.

The filing comes as VF Corp. is preparing to spin off its jeans unit and its franchise Wrangler and Lee brands into a separate company, to be called Kontoor Brands, and jeans-driven chains Gap and Old Navy get set to split in two.

Levi’s reported 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.

Fourth quarter net income declined 17 percent to $97 million. 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.

Full year adjusted earnings before interest and taxes increased 13 percent to $542 million on higher revenues and gross margins, partially offset by higher costs related to the expansion of the company’s direct-to-consumer business, increased advertising investments and higher compensation expense reflecting stronger company performance.

In its SEC filing in conjunction with the IPO filing, the 165-year-old company, known for inventing blue jeans, said the Levi’s brand has the highest brand awareness in the denim bottoms category globally. But the company stressed that it has grown and diversified in several directions.

“We have a diversified business model that spans our three regions, a robust presence across both our wholesale and direct-to-consumer, or DTC, channels and an established market share position in jeans, non-jeans bottoms and tops for both men and women,” the company said in its SEC filing. “In fiscal year 2018, 20 percent of our net revenues were from tops, 74 percent of our net revenues were from bottoms, and 6 percent of our net revenues were from footwear and accessories. In fiscal year 2015, 11 percent of our net revenues were from tops, 83 percent of our net revenues were from bottoms, and 6 percent of our net revenues were from footwear and accessories. The continued geographic and channel diversification of our business has contributed to improvements in our gross margin.”

The company’s Europe segment represented 29 percent of its revenues in fiscal year 2018, and its Asia segment represented 16 percent. That compares to 23 percent for Europe in fiscal 2015 and 17 percent in Asia, which, according to Levi’s, points to the geographical diversification of its business.

Levi’s said it believes it has a “significant opportunity” to deepen its presence in emerging markets like China, India and Brazil, in order to “drive long-term growth.”

The company also has plans to pursue acquisitions that will supplement its growth profile and drive further diversification for the brand.

“We will evaluate potential acquisition opportunities with a focus on strategic acquisitions that will enhance our portfolio of brands, bolster our product category expertise or add a new operating capability, while fitting well with our corporate culture and providing an attractive financial return,” Levi’s said.

The proposed offering will be made only through prospectus. Goldman Sachs & Co. and J.P. Morgan Securities will serve as joint lead book-running managers for the offering.

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