What Does Levi’s Impending IPO Have To Do With Your Leggings?

Image: Levi’s

What Does Levi’s Impending IPO Have To Do With Your Leggings?

Levi’s is coming for your leggings. Over the past decade, the stretchy workout pant – which had for years been limited to a life inside the gym – has replaced the traditional pair of jeans as casualwear for hordes of females, enabling brands like Lululemon and Nike to ...

February 20, 2019 - By TFL

What Does Levi’s Impending IPO Have To Do With Your Leggings?

Image : Levi’s

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What Does Levi’s Impending IPO Have To Do With Your Leggings?

Levi’s is coming for your leggings. Over the past decade, the stretchy workout pant – which had for years been limited to a life inside the gym – has replaced the traditional pair of jeans as casualwear for hordes of females, enabling brands like Lululemon and Nike to reach entirely new consumers (in some cases) by outfitting women en mass as part of the seasonal trend-turned-bona fide apparel category called athleisure. Now, Levi’s in gearing up to go public next month, aims to put its fight against the frequency with which we wear gym-wear as general day-wear to the test.

In accordance with the widespread adoption of athleisure – i.e., clothing designed to be worn both for exercise and casual wear – the market’s classic sportswear brands, the ones most apt at turning out work-out style garments, have profited significantly. As the trend solidified as a lasting sartorial statement, the sportswear makers of the world were joined by lifestyle and fashion brands and even celebrity-fronted collections, many of which rushed to introduce activewear lines in an attempt to bank on the frequency of consumers defying the old norm and wearing their workout gear outside of the gym (or even in lieu of the gym).

While the domination of athletic-wear as casual-wear was boosting the bottom lines of many brands, it was simultaneously resulting in the fall of others. The drop in demand for jeans, which started with an initial $10 billion decline in sales from 2013 to 2014, “caught denim makers by surprise because they have never really seen it before,” Marshal Cohen, chief industry analyst of The NPD Group, told NBC. The decline in denim-specific spending was particularly rare, he says, because jeans are a “commodity” business. “We buy and replenish [our wardrobes with denim] all the time,” per Cohen. Or at least, we used to.

The effects of the relegation of denim to the back of consumers’ minds and closets have been significant. VF Corp., the owner of Lee and Wrangler jeans, for instance, announced last year that it would spin off its two jeans companies, thereby, prioritizing its more profitable Vans and North Face brands. According to the Wall Street Journal, Greensboro, North Carolina-based VF Corp.’s “jeans sales slowed in recent years as more women opt for yoga pants or premium denim brands.”

But even brands higher up on the price point totem pole have not been immune to struggle. According to market research firm Euromonitor International, sales of premium denim fell 8 percent in 2016. The following year, Los Angeles-based True Religion, which was known for its $300-plus jeans, filed for bankruptcy. Less than a decade prior, the brand was at the height of its success, with hordes of wildly famous fans, retail presences in more than 50 countries, and annual revenues of nearly a half a billion dollars.

The reality that True Religion and other denim brands were facing was this: Americans were buying fewer pairs of jeans, and when they were, they were shelling out far less than they once were. While this remains true, it that may not be that way for long, as denim – the long lost epitome of casual wear – is being pushed back into the forefront.  The jeans category in the U.S. is growing again – up 2.2 percent to $16.7 billion – after four straight years of falling sales, according to data from Euromonitor.

Pair those figures with a January 2018 report from The NPD Group, which revealed that denim sales are, in fact, outpacing the overall apparel industry. Apparel sales are up just 1 percent, per NPD, while the denim industry is growing at a rate of 5 percent.

Companies like Calvin Klein and Tommy Hilfiger’s parent company PVH, are seeing results. PVH CEO Manny Chirico said in an earnings call in April that denim has showed “incredible improvement” for its labels in 2017. Abercrombie CEO Fran Horowitz also revealed increases in denim sales across its brands, especially at Hollister, which had “a record year” in denim sales.

They are not to be outdone, however, by Levi Strauss & Co. One of the oldest players in the American denim game, Levi’s is living in a relatively sweet spot, one that – with its less-than-$100 jeans –  is banking on the fact that expensive, designer jeans have fallen out of favor. As other denim brands have scrambled to diversity their wares in light of the demand for leggings, Levi’s focused on strengthening its womenswear offerings to supplement its already-strong men’s division. And to a large extent, it worked.

The American jeans giant has returns to point to, reporting an 8 percent increase in revenue for 2017, the largest it has seen in a decade. But even more telling than that, San Francisco-based Levi’s appears to be banking on a full-stop resurgence of denim. The company filed paperwork for an initial public offering with the Securities and Exchange Commission last week, making good on a plan it first announced late last year.

According to the filing, the company – which first went public in 1971, only to be taken private again in 1985 – sees expansion opportunities in emerging markets, such as China, India and Brazil. Right here at home, however, the lager push towards denim by Levi’s and its rivals, which neatly coincides with a slope in athleisure buzz, means that change may be coming to our daily uniforms and our closets.

And if Levi’s has its way, that change will be big. The company plans to raise $550 million by offering shares at $14-$16. According to Seeking Alpha, “At the midpoint, it would be valued at $6.1 billion,” meaning that it will be the largest IPO by market cap, at least for now.

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