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An employee holds a grocery bag while telephoning a customer at the Levi Strauss & Co. flagship store in San Francisco, March 18, 2019.
David Paul Morris | Bloomberg | Getty Images
Levi Strauss & Co. agreed on Thursday to buy yoga clothing brand Beyond Yoga, launching the jeans maker into the competitive sportswear space.
Levi did not disclose the size of the cash deal, which is expected to close in the fourth quarter.
Levi expects the acquisition to add more than $ 100 million to its net sales for the next fiscal year and immediately bolster its profits.
“We’ve been looking at acquisitions for a while, and the sportswear space has obviously been very, very attractive,” Chip Bergh, CEO of Levi, told CNBC in a telephone interview. “We see tremendous growth potential here. This places us as a company in the high-growth, high-margin sportswear segment.”
Levi shares rose less than 1% in extended trading on the news.
Once the transaction is complete, Levi said Beyond Yoga will operate as a stand-alone division within his company. Co-founder Michelle Wahler will continue to serve as CEO of Beyond Yoga, reporting to Bergh.
Levi CFO Harmit Singh said Beyond Yoga has more than doubled revenue while increasing profitability over the past three years. The Los Angeles-based brand was founded by two women in 2005. Its marketing often echoes messages of body positivity and waist inclusiveness with young girls.
Bergh said Levi plans to expand the Beyond Yoga brand outside of the United States and open more physical stores. The deal is also expected to help Levi grow his female business, which now accounts for around a third of sales. The goal is to increase the percentage of women to 50%, said Bergh.
The acquisition of Levi’s is another vote of confidence that an already fashionable retail industry grows even further, as businesses from Kohl’s to Target compete for a fraction of the sportswear market.
On Monday, Wolverine Worldwide – the company behind Merrell, Saucony, Sperry, Stride Rite and other shoe names – grabbed rival Lululemon brand Sweaty Betty for $ 410 million.
Big box chains Dick’s Sporting Goods, Kohl’s and Target have also launched their own sportswear offshoots, competing with Nike, Under Armor and the Gap’s Athleta banner. There are a number of other small start-ups in the space, ranging from Outdoor Voices to Nobull to Bandier.
Even though Americans return to the office and socialize with their coworkers, many still opt for comfortable, casual clothes, including stretchy socks and sneakers.
This changing fashion trend has been dubbed “workleisure,” a sportswear set that can be worn from a workout class to the cafe. This is fueling further growth in the sportswear category.
“As some people start to go back to the office, you don’t see the suits anymore, you see people come into the office with more casual clothes, even athleisure type products,” Bergh said. “And it’s a truly global phenomenon.”
Shares of Levi are up 37% year-to-date. Its market capitalization is $ 11.1 billion.
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