Taken private in 1985, Levi Strauss (LEVI) is finally returning to public markets next Thursday in an IPO expected to raise $550 million at a market cap of $6.1 billion.
Levi's IPO is coming on the heels of an especially strong year for the company. Between 1999 and 2017, its sales fluctuated between $4.1 and $5.1 billion, but in FY2018, sales soared +14% to $5.6 billion. That sales growth, a 20-year high, was driven by its women's and tops segments, sales in Europe, and a higher number of stores.
Levi hit another 20-year high in 2018 with a gross margin of 54%, which it attributes to improvements in its supply chain and inventory management, as well as a shift to its higher-margin direct-to-consumer (DTC) channel and Europe segment.
However, the company's record gross margins have not yet benefited the bottom line, due to rising SG&A costs. SG&A spend accounted for 44% of 2018 revenue, also a 20-year high (37% on average), partly due to new store expansions/openings in its DTC channel, as well as higher advertising costs (+24% y/y).
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