Business

Levi’s Shaking Off Pandemic With Sales and Profit Gains – Headline 4 Ever

Levi Strauss & Co. is hitting its stride after a year of COVID-19-driven change. 

“We’re seeing a really strong recovery, it gives us a lot of confidence going forward,” Chip Bergh, chief executive officer, told Headline 4 Ever after the company posted big second-quarter sales and profit gains. 

Not only are sales perking back up as COVID-19 restrictions lift in vital consumer markets in the U.S. and Europe, but a few key trends are bringing the market right into Levi’s sweet spot. 

“During the pandemic about 35 percent of consumers changed waist sizes either up or down,” Bergh said. “That gives people a reason to go out and update their wardrobe.” 

And when they go to make that update, they’re turning to more casual looks, a continuation of a long-standing trend, and denim, a category that ebbs and flows. 

“We really are seeing evidence of a new denim cycle here,” said Bergh, noting sales of denim looks have been outpacing apparel by several points. “Denim is definitely a go-to category for [consumers] as they’re emerging” from pandemic lockdowns.

And it’s a looser look that’s ruling now.

“This trend toward looser, baggier fits is a trend that we led going back to the pre-pandemic period when we launched the high-rise balloon pant,” Bergh said. “That’s kind of a responsibility that we have [as the leading denim brand] and we’ve just doubled down on that.” 

The brand has also been building in the area of sustainability with a number of initiatives — from efforts to cut down on water usage to selling secondhand — and has a new advertising camping with the tagline: Buy Better, Wear Longer. 

“This notion of buy better, wear longer is an idea that Levi’s has an opportunity to kind of own,” he said. 

The emphasis — on style, advertising and other more run of the mill interests typical of fashion’s C-suite — show just how much has changed since a year ago, when the industry was in crisis and struggling through the first, dramatic COVID-19 lockdowns. 

Levi’s net income tallied $65 million for the second quarter ended May 30, a vast improvement from the $364 million loss a year earlier when COVID-19 had stores closed and brands of all types scrambling. 

Adjusted earnings per share came in at 23 cents, handily beating the 9 cents Wall Street had penciled in. 

Sales for the quarter jumped 156 percent to $1.3 billion from $498 million a year earlier. In the Americas, sales grew 283 percent to $715 million, while Europe was up 183 percent to $365 million and Asia gained 128 percent to $196 million.  

The pandemic is still weighing on Levi’s, with 8 percent of its stores currently closed due to health restrictions. But the company today is considerably different than it was at the start of 2020 — trimmed down, streamlined and more digital and more directly connected with consumers. 

Levi’s e-commerce sales were up 42 percent even with stores reopening for the quarter. Including third-party websites, Levi’s e-commerce sales rose 75 percent for the quarter. 

Levi’s upped its outlook for the second half and is now looking for sales growth of 28 percent to 29 percent from a year earlier, or an increase of 4 percent to 5 percent from the same period in 2019. 

Harmit Singh, chief financial officer, said Levi’s was structurally a “much stronger business” than it was before the pandemic, with more digital sales, stronger gross margins and a healthier U.S. wholesaler business that is “growing with the winners” of the retail set.

Singh also pointed to the company’s “very strong” balance sheet. 

“We have access to about $2 billion of capital,” Singh said. “It allows us to do a few things, which is, grow the business organically as well as grow the business inorganically” and return money to shareholders. 

That opens the door a bit wider, perhaps, to a potential acquisition — something Levi’s top brass has always said was a possibility, but one that seemed more remote in the past. 

Levi’s is believed to be taking a hard look at its portfolio. 

Headline 4 Ever reported in May that the company was close to selling its Dockers brand to Bluestar Alliance, according to market sources.

Bergh declined to comment on the rumor. 

 

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