Levi’s CEO Chip Bergh has some tips for jeans owners: Don’t freeze your jeans. And don’t put them in the washing machine.
Bergh turned heads and noses at a May 2014 event when he announced that he had never washed the pair of 501 Levi’s jeans he was wearing at the time. He still hasn’t washed that now-10-year-old pair of jeans, Bergh admitted on CNN Business’ Markets Now live show with Alison Kosik on Thursday.
He doesn’t freeze his jeans either.
“That’s an old wives’ tale,” he said. “It does not work.”
He also has never washed or frozen the jeans he wore to the New York Stock Exchange on Thursday for his company’s IPO celebration — although he said those jeans were newer.
Bergh had a lot to celebrate: Levi’s stock soared 33% in its debut.
Why Levi’s is going public
It’s not the first time Levi’s (LEVI) has gone public. The company was publicly traded from 1971 unil 1985, when it was privatized. Levi’s (LEVI) went public again, to ramp up investment in China and expand into new categories.
Bergh noted that the company lags its rivals in technology, including its online store and other digital products.
He said most fashion companies have more choices for women, but Levi’s is more known for its men’s line of jeans. The company has been expanding its women’s product lines for several years, but Levi’s plans to use the cash it raised to market and develop those products more heavily.
“Growing our portfolio is driving results,” Bergh said.
Levi’s also wants to make a more meaningful push into China. He noted some smaller competitors have gotten ahead of Levi’s in China. Although 20% of the apparel industry is in China, that region represents just 3% of Levi’s business.
Bergh noted that Levi’s jeans had been a symbol of American culture for more than a century, and young people behind the iron curtain clamored for them after the Berlin Wall fell in 1989.
“Unlike other parts of the world where this brand had a deep history, passed from generation to generation, or it was a forbidden fruit that symbolized everything that was great about America … we don’t have that story in China,” Bergh lamented.
What kind of market Levi’s is entering
The stock market treated Levi’s well Thursday, but it hasn’t been kind to some other IPOs in recent past.
Levi’s is profitable, unlike many companies that went public in the past few years. Granted, many of those have been tech companies, which typically take a while to find their footing.
So will the market continue to support Levi’s?
Alicia Levine, chief strategist at BNY-Mellon, thinks so. She said on “Markets Now” on Thursday that the economy will be weaker in the first quarter than in recent quarters, but it will grow stronger as the year continues. So she expects earnings to fall about 4% this quarter but grow the rest of 2019.
Levine blamed the Fed’s overly hawkish rate hike in December and President Donald Trump’s tariffs for the slowdown in growth. But she was encouraged that the Fed signaled a more dovish stance on Wednesday, and she believes China and the United States will come to terms soon.
“We think this is the trough, and we’ll see acceleration throughout the year,” Levine said. “Part of the reason this market is stalling out is because we need a trade deal. I would expect a pop [if there’s a trade deal]. I don’t think that’s fully priced in.”
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