Chip Bergh successfully shepherded Levi Strauss & Co. onto the public market last month — but he’s nowhere near done with selling the company or its namesake brand.
“It was another great quarter,” Bergh, who leads the business as chief executive officer, told WWD on Tuesday, right after the San Francisco-based Levi’s posted its first quarterly update since going public. The denim maker’s first-quarter profits tallied $147 million, reversing year-ago losses of $19 million. Adjusted earnings before interest and taxes rose 14 percent to $206 million while revenues gained 7 percent to $1.4 billion.
The ceo is looking beyond his direct jeans competition, like the soon-to-be-public Lee- and Wrangler-parent Kontoor (for now still a part of VF Corp.), and traditional fashion competitors like PVH Corp. Instead, he’s eyeing the outsize growth profile of Nike Inc. — even if he still has a long way to go.
Levi’s annual sales weigh in about $5.7 billion, while Nike tips the scales at nearly $39 billion.
But the ceo thinks he has the brand and the company to chase his active rival to the north in Beaverton, Ore.
“The biggest advantage that we have today is the Levi’s brand,” he said.
And even though it is the brand that invented blue jeans, it still has farther to go, he said.
“Just as Nike has been able to successfully grow beyond running shoes, where they started, to become such a diversified business — still, fundamentally, almost all of their revenue is still from the Nike brand itself,” Bergh said. “Nike is a relevant benchmark.”
Use it as a benchmark he did, pointing to his stock’s price-to-earnings ratio.
Levi’s stands at a trailing PE ratio of 29.1 while Nike sits at 32.8, VF Corp. comes in at 20.6 and PVH at 13.1.
“We’re up there closer to Nike than we are, say, closer to PVH, even ahead of VF,” Bergh said. “[Levi’s] should be valued closer to Nike than PVH.”
While most of that comes down to brand, Bergh said Levi’s has also been growing stronger.
“The entire process of getting ready and going through the IPO has made us a better company,” Bergh said. “When you’ve got outside investors in the company, you have to be able to articulate your strategy very, very clearly. You have to be able to talk about sources of growth historically, but also what the levers of growth are going to be on a go-forward basis.”
Even though Levi’s is public now, its story is unchanged. Bergh said the company is growing strongly at home, with a 9 percent revenue increase in the Americas, and has plenty of room to expand in Europe and especially in China.
Shortly after the IPO, Bergh said, he spent a week in China, which accounts for just 3 percent of Levi’s business, where brands like Nike and Adidas draw closer to 20 percent of their revenues.
Women’s and tops are also two areas where Levi’s is continuing to branch out.
The brand’s reintroduction to the public market — the company was public before, for a 13-year stretch starting in 1972 — gives a broader group of investors a chance to bet on Levi’s.
The offering last month priced at $17 a share, comfortably above the $14 to $16 it initially projected, and the stock closed up 32 percent on its first day, when even the staid traders on the floor of the New York Stock Exchange were outfitted in Levi’s jeans and jackets.
So far, shares of Levi’s are still up 29 percent from their offering price, having gained 2.6 percent on Tuesday to close at $21.86.
Levi’s raised $161 million in the offering, which will go to general corporate purposes and, if the right opportunity arises, an acquisition.
The Haas family, descendants of founder Levi Strauss, raised roughly $462 million in the offering and retains control of Levi’s by virtue of their Class B super-voting shares.