How to invest in Levi’s

Imagine being 16 years old, emigrating with your family across the ocean and being able to invent something so iconic that people still talk about it 140 years later. This is what Levi Strauss did. 

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Is it worth investing in Levi's nowadays?

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Before we answer this, let's look at some data.

Levi's first went public in 1971, but was again taken private in 1985. In March 2019, the company went public again. Since then, a lot has happened. 

If you had invested  $1,000 on the date of the company's second IPO, you would have $1,300 today. Considering the market crash from March 2020, which heavily affected the company, and the fact that this is a relatively short amount of time, that’s actually a decent return on your investment. You would have increased your capital by a solid 30%. The company’s shares have also outperformed the stock market in the last year. Levi's share price has risen by 133% compared to 36% for all the companies in the S&P 500 between July 2020 and July 2021.

But we all know that past performances are not an indicator of future performances, so let's take a closer look at Levi's latest developments and future plans. 

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From the first patent to the smart casual revolution

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Levi Strauss, the creator of what are now known as "blue jeans", was born in 1829 in the small city of Buttenheim, Bavaria (yes, the land of Lederhosen). After the sudden death of his father in 1846, together with his mum and his sisters, Levi decided to migrate to the U.S to join the rest of his family in New York, to work in the family dry goods wholesale business. Seeing opportunity in California, he packed his bags for San Francisco, selling clothes, tents, handkerchiefs, combs, bedding and bags. 

One of his customers, a guy named Jacob Davis, co-invented a pair of rugged work pants made from a tough denim fabric, adding rivets to reinforce the construction. Davis wanted to patent this new idea but needed a business partner to set the motion mechanism. Levi was enthusiastic about the idea. The patent was granted to Jacob Davis and Levi Strauss & Company on May 20, 1873, and blue jeans were born. 

The company kept evolving from there. In 1934, Levi's created the first jeans for women. It may seem like a simple contribution to the gender equality journey, but people had to start from something, right? Women wearing pants was considered unacceptable until the 40s. Now, with the vintage hype from the last few years, it's experiencing a new moment of popularity. But that's how fashion works.

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What moves Levi's stock price?

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Being a 160 years old company, Levi Strauss & Co. (yes, that's the company's full name) went through many ups and downs, according to historical moments, trends, and the general state of the economy. 

With their last IPO, the company pushed on its "effortlessly cool" status and being relatively cheap (but already well established, therefore profitable) compared to other IPOs from the same period. Stocks were sold for $17 apiece, showing a bright future in front of the investors. Then March 2020 arrived. Having a retail system almost entirely based on traditional "in-person" shops, the pandemic had a massive impact on Levi's business, causing a 57% loss in share prices at the end of March 2020. Levi Strauss & Co. took the challenge and decided to focus their resources on improving their online sale strategy, working on more sustainable fabrics for their jeans, generally implementing the quality of their products and working on their company values. The strategy paid off. In the latest earning report from July 2021, the firm reported net revenues up 156% in the second quarter compared to Q2 of last year. Shops reopening in Asia and the U.S. and considerable investments in online distribution networks have been key factors in this rebirth. 

Levi's also decided to work towards several environmental-friendly targets, including 100% sustainably sourced cotton and 100% renewable energy in owned & operated facilities by 2025. All these factors could have a significant impact on the future of the company. 

Investing in fashion carries a different risk — your brand can stop being cool at any time. Levi’s has gone through several cycles of being popular and unpopular. So far, it’s been able to at least survive those cycles each time. 

Let's be honest, when we close our eyes and think about a pair of jeans, we usually picture a pair of the iconic 501 Levi's in our head. Investing in Levi's is a bet on whether the company will be able to keep up with the newest fashion trends combining a new environmental-friendly business model into its plan. 

Any opinions, news, research, analyses, or other information contained on this website are provided as general market commentary, and do not constitute investment advice, recommendations nor should be perceived as (independent) investment research. The author or authors are employed by Vivid and may be privately invested in one or several securities mentioned in an article. Vivid Invest GmbH offers as a tied agent of CM-Equity AG the brokerage of transactions on the purchase and sale of financial instruments with the exception of those in the area of foreign exchange brokered by Vivid Money GmbH.