Levi Strauss shares are on a tear after the company’s initial public offering.
Shares of the 166-year-old denim company ended trading nearly 32 percent higher on Thursday following the company’s second-ever IPO. Levi Strauss first went public in 1971 before going private for over three decades.
Here’s what four Wall Street and retail industry experts think of the IPO:
Rick Helfenbein, CEO of the American Apparel and Footwear Association, says denim — Levi Strauss’ claim to fame — has serious staying power:
“Denim’s always in fashion. My mother-in-law says that all the time: Denim never goes out of fashion. So don’t worry about the cycle. Worry about how they’re addressing the business to deal with the millennial customer. That’s where it’s going.”
Roxanne Meyer, senior research analyst at MKM, argued that Levi’s other segments will likely also drive big returns:
“Here’s a brand that is growing 20, 30, 40 percent, in some categories, in what is a very tough retail landscape. So this, to me, is one of the few standouts. […] “It’s doing that, I think, through two things: one, it’s got a CEO that is laser-focused on brands, innovation and customer. … Second, a real focus on innovation and using what they’re calling a Eureka Lab to innovate and to shorten the supply chain. And it’s growing in categories where it’s been underpenetrated, whether that’s tops, whether that’s women’s, whether that’s through geographical mix, so there’s really a large amount of opportunity here.”
SW Retail Advisors President Stacey Widlitz also highlighted Levi’s diversification story:
“If you look at the top line, and assuming that the momentum stays where it is, it’s a reasonable valuation here. I think … you can’t just look at this as a jeans play because they have been able to diversify into other categories. They’ve been able to diversify away from men, [which] were 70 percent of the business, so that’s clearly a growth runway here whereas other brands are a bit more mature and have had a tougher time diversifying.”
But Steve Grasso, Stuart Frankel & Co.’s director of institutional sales, warned that the company’s IPO could be more foreboding than people think:
“That IPO market is fuel for the rally. It does mean risk-on, but it also means that people want to get in here because they feel that [they want to lock in] valuations and toppiness of the market. … So that could be a counterintuitive measure there and it could mean a top. Just watch [earnings per share], see how the market reacts with EPS going negative, see how it reacts with guidance, see where that comes in. GDP is falling, so buyer beware at this point.”