Levi Strauss IPO comes as denim market braces for corporate shakeups

Levi Strauss sells in 110 countries around the world, in more than 50,000 retail locations. Fifty-five percent of its revenue comes from the Americas, with the U.S. the largest market. Levi generates 28 percent of its revenue in Europe, and 16 percent in Asia.

While overall domestic jean sales are expected to improve in the coming years, Euromonitor predicts the compound annual growth rate will be just 1 percent from 2018 to 2023. That’s an improvement from down 2.3 percent between 2013 and 2018. Globally, the market research firm expects global jean sales to rise 2.1 percent from 2018 to 2023, a bit slower than the 3.3 percent pace between 2013 and 2018.

Over the past decade, jean sales globally have grown at a 3.5 percent CAGR, slower than the growth rate of all apparel, according to Bernstein analyst Jamie Merriman. Consumers are buying less “premium” and “super premium” denim than mid- and lower-priced jeans, according to Bernstein research. While Levi sells in a broad price range, most of its merchandise falls below what is considered premium price points.

Premium jean sales have been hurt by the rise of athleisure.

“Instead of buying a new pair of designer jeans, many women have opted for more comfortable and less expensive yoga pants in recent years,” Deborah Weinswig, Coresight Research CEO said in a note to clients.

In the last five years, Nike, Adidas, Lululemon, Under Armour and Athleta have gained apparel share in the U.S. as Levi, True Religion, Gap, J. Crew, Banana Republic and Ralph Lauren have lost ground, according to Bernstein.

Around two-thirds of premium denim — and more than 70 percent of super premium denim — are purchased by women according to Bernstein’s research. The data suggests those same women have been replacing their jeans with athleisure in recent years, but the trend may be turning.

Women’s jeans are expected see a resurgence in 2019, according to NPD’s Future of Apparel Report, as “the social, fashion-forward shopper will be the primary investors in women’s jeans as they seek comparable alternatives to their activewear.”

The growth of athleisure has likely been less of a pressure point for Levi, because its men’s category is much larger than its women’s. The men’s business accounted for $4 billion of Levi’s $5.6 billion 2018 revenue, or more than 70 percent. The denim maker says its men’s jeans business had the top market share by retail sales in the U.S., France, Mexico and the United Kingdom, which are four of its top five markets.

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