Levi Strauss shares surge, as jean giant makes return to the public market

Key Points
  • Blue jeans giant Levi Strauss & Co. began trading Thursday on the New York Stock Exchange at $22.22 a share, after having priced its initial public offering at $17 a share the night prior.
  • The company had initially expected to price its offering between $14 and $16 a share.
  • The 166-year-old company first went public in 1971, but has been private for the last 34 years.
What five experts have to say about investing in Levi Strauss

Shares of blue jeans giant Levi Strauss & Co. surged 32 percent in their debut on the New York Stock Exchange, giving the company a market capitalization of $8.7 billion and demonstrating strong demand for owning a part of the jean giant.

Levi Strauss on Wednesday night priced its initial public offering at $17, topping original expectations of between $14 and $16 a share.

The newly public company, trading under the symbol "LEVI," has an opportunity to improve market share with women beyond its core business of men's jeans. Its men's business accounted for $4 billion of Levi's $5.6 billion 2018 revenue and was a "key driver of its profits," the company has said.

Levi Strauss is also eyeing further expansion through new stores, further wholesale relationships and building out its online sales. Geographically, it expects further growth in China, where just 3 percent of its revenue came from in 2018.

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Those plans come even as the global jean industry has faced pressure from new competitors and alternatives like Lululemon Athletica leggings. Over the last 10 years, global jeans sales have climbed at a 3.5 percent compounded annual growth rate, slower than the entire apparel category, according to Bernstein analyst Jamie Merriman.

Still, Levi Strauss has carved out a unique place for itself, with its iconic brand and "exceptional quality at accessible prices," the company says. For the year ended November 2018, Levi Strauss reported sales of $5.58 billion, a 13.7 percent jump over the year prior. That increase has come as the company also added to its marketing, which jumped by nearly 24 percent over the same year.

Chip Bergh, president and chief executive officer of Levis Strauss & Co., center, rings a ceremonial bell as Harmit Singh, executive vice president and chief financial officer of Levi Strauss & Co, right, smiles during the company's initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York on Thursday, March 21, 2019.
Jeenah Moon | Bloomberg | Getty Images

Some of the jean company's efforts over the past few years to solidify its connection with customers include a presence at U.S. festivals and sporting events. In 2017, singer Beyonce wore the brand's cutoff shorts for her headline performance at the Coachella music festival

The 166-year-old company first went public in 1971, but has been private for the last 34 years. The offering will give the descendants of its founders a chance to cash out some of their holdings. According to the prospectus, members of the Haas family will sell more than 21 million shares in the IPO.

The family, though, will continue to hold nearly 81 percent of voting power, through the company's dual share structure. The family, through "Class B" stock, will have 10 votes for every 1 vote of common "Class A" shares.

Levi Strauss has said in its IPO documents filed with regulators that it plans to use proceeds from its offering to invest further in its business, including potential acquisitions or strategic investments. As of its IPO filing, it had no immediate plans for investments or acquisitions.

Levi Strauss' IPO won't be the last chance for public investors to buy shares in a jean company this year. VF Corp plans to spin off its jeanswear business, which includes Wrangler, Lee, Rock & Republic, into a new public company called Kontoor Brands in the first half of 2019. VF's remaining brands, which include Vans, The North Face, Timberland and others, will remain under the VF Corp parent company.

Gap, meanwhile, is planning to spin off its Old Navy brand into its own publicly traded company, leaving the Gap brand, Banana Republic, Athleta, Intermix and Hill City under the parent company with a name still to be determined. Both new companies will sell jeans, along with other apparel.

CNBC's Courtney Reagan contributed to this report

Levi Strauss opens at $22.22 per share