My Bullish Thesis

CEO ("Charles V. Bergh" a.k.a "Chip Bergh" or "Chippy")

In addition to being the CEO of Levi Strauss & Co. ​he also serves on the board of directors at Hewlett-Packard ("HP") and VF Corporation (Dickies, Jansport, The North Face, Timberland, Vans, and more). Prior to joining Levi, Chippy worked at Procter & Gamble for 28 years.

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The Bull Thesis

Levi Strauss & Co Invented the Blue Jean and the Company is Ancient

Levi Strauss & Co. is one of the largest apparel companies best known for their denim products. The company is also ancient. It was founded in 1853 by Levi Strauss, a jew, who invented the blue jean in 1873 with Jacob Davis.

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Safety

The fact that this company has been around for over 150 years makes it unlikely that it will go out of business. This business has stood the test of time. This company survived the civil war and every war since.

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Fresh IPO

The company first went public in 1971, but was taken private in 1985. The decision to take the company private was made by Robert D. Haas, a descendant of Levi Strauss. In making the decision, Robert Haas stated that "going private would allow management to focus its attention on the long-term rather than being concerned with the short-term as a public company must be."

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Most recently, the company was taken public on March 21, 2019. A key reason Levi Strauss is going public is that an IPO allows the founder's descendants to cash-out some of their holdings, yet retain control because of the dual-class shareholder structure. After the IPO, the Haas family will still control approximately 75% of the companies shares and votes.

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Dividend

Uniquely for an IPO, the company pays a dividend. Currently the dividend yield is 2.24%. Shortly after its IPO in March the company began paying a dividend of .15c per share; however, due to the pandemic, the company reduced the dividend down to .08c per share. It appears that the company is fairly committed to keeping their dividend.

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Strong History of Financial Performance and Growth

Prior to the pandemic, Levi posted 3 consecutive years (2015-2018) of double digit revenue growth. In 2018, the company had net revenues of $5.6 B. Historically, most of the company's revenues come from wholesale; however, the company had been making efforts to increase its Direct to Consumer ("DTC") business (we will see if those efforts continue in the face of the pandemic).

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The Bear Thesis

Bluejeans Could go out of Style 

Yeah right... As with any company that operates within the fashion/apparel industry clothing goes in and out of style. However, this is less of an issue for a company like Levi because jeans have become an (almost) essential piece in nearly everyone's wardrobe.  Denim will likely always be in style in one form or another.

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COVID-19

Due to the closures of malls and many retail stores because of COVID-19, 2020 was a tough year for any company in the fashion/apparel industry. However, Levi was well positioned to handle an economic catastrophe.

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The story isn't great, revenues were down 27%. The company saw a 50% increase in its e-commerce business which helped to offset some of its losses. However, most of the company's wholesale partners have reopened and business should return back to normal (or at least almost normal) sometime in 2021.

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Conclusion

The fashion/apparel industry was one of the hardest hit by the COVID-19 pandemic. Levi has a strong history of financial performance and prior to the pandemic was reporting exceptional growth. This is a great company that is likely trading at a discount due to struggles as a result of the COVID-19 pandemic and they pay a dividend.