Why Levi's Dominates Denim

Levi Strauss & Co. is considering an IPO in 2019. Levi's patented jeans in 1873 and remains the biggest denim retailer in the U.S. 150 years later. Though it often missed major fashion trends in previous decades, the 2010s have brought Levi's back to popularity. Watch this video to find out how.

Denim sales have been outpacing the overall apparel industry. Research from The NPD Group has apparel growing 1 percent, while the denim industry is growing 5 percent.

Levi Strauss reported revenue of $1.39 billion for the quarter ending Aug. 26, up 10 percent from the previous year. The San Francisco-based company reports quarterly earnings because its debt is publicly listed.

Consumers were substituting their jeans for yoga pants and leggings, but it looks like fashion could be swinging back in favor of denim.

"I think that the outlook for jeans is positive," UBS analyst Jay Soles told CNBC. "Athleisure — performance apparel — that trend has changed a lot."

Nostalgia and streetwear have brought back styles from the 1980s and 1990s, benefiting iconic brands like Levi's. Analysts think a new style is on the horizon to unseat skinny jeans, the last big denim trend.

"It is an opportune time [for a Levi's IPO] if there is a denim cycle coming back," Macquarie Capital analyst Laurent Vasilescu said.

If not, shoppers will still be waiting two or three years to buy a new pair of jeans, instead of only one, like before athleisure dominated.

Levi's won't be the only new stock for investors looking to try on jeans this year. VF Corp, which owns rival denim brands Lee and Wrangler, announced in August that it would be spinning off its jeans brands into a separate public company called Kontoor Brands. The move will allow the company to focus on growing its other brands, like Vans and The North Face.

VF Corp had been aiming to complete the spinoff in March. It filed the paperwork with the Securities and Exchange Commission in mid-December, but CFO Scott Roe told analysts on an earnings conference call in January that the partial federal government shutdown could delay Kontoor's market debut.

A volatile stock market could also mean that Levi's lands short of the $600 million to $800 million that it reportedly wants to raise through the IPO. Despite a resurgence in its Calvin Klein and Tommy Hilfiger brands, PVH Corp, which has a market value of $8.3 billion, is down 26 percent over the last 52 weeks. While VF Corp's stock, with a market value of $36.2 billion, is faring better thanks to its non-denim brands, shares are only up 3 percent in the last year.

More videos

NBA 24 Aug 2019 21:00 CEST

JaVale McGee's Best Blocks