Levi’s Q1 tops Street as DTC sales surge; brand gets big call out from Beyoncé
Levi Strauss & Co.’s business continues to be less reliant on its wholesale partners and more on its own operations.
The denim giant reported that direct-to-consumer sales (through its own brick-and-mortar and online stores) accounted for a record 48% of overall sales during its first quarter, up from 42% in the year-ago period and 25% higher on a two-year basis. Levi's reported 2023 net revenues were $6.2 billion.
“The momentum in our global DTC business continues, with DTC up in all segments,” stated Michelle Gass, who took the reins as Levi’s CEO in January. “We are on our way to transforming this company into a best-in-class DTC-first apparel retailer, setting the stage for our next phase of sustainable profitable growth.”
During the company’s earnings call, Gass was asked about a possible sales boost from Beyoncé, who has a song titled “Levi’s Jeans” on her just-released chart-topping album Cowboy Carter. In response, Gass said denim is “having a moment and the Levi’s brand is having a powerful moment around the world.”
“One of the things that really is significant about the Levi’s brand, and we place a lot of emphasis and investment, is making sure that Levi’s brand remains in the center of culture,” Gass told analysts. “I don’t think there’s any better evidence or proof point than having someone like Beyoncé, who’s a culture shaper, to actually name a song after us.”
Levi’s reported a net loss of $10.6 million, or $.03 cents a share, amid charges related to layoffs and cost cuts, in the quarter ended Feb. 25, compared to net income of $114.7, or $0.29 a share, in the year-ago quarter. Excluding one-time costs related to Levi’s restructuring, the company reported earnings $0.26 a share, topping analysts' estimates of $0.21 per share.
Revenue fell 8% to $1.56 billion, better than the $1.55 billion analysts had expected. Direct-to-consumer net revenues increased 7%, including a 10% increase in the U.S. and a 4% increase in Europe, excluding Russia. Wholesale net revenues declined 18%.
Revenues from e-commerce grew 13%, reflecting double-digit growth across the Levi’s and Beyond Yoga brands.
In the Americas, net revenues decreased 11%. Adjusting for the shift in wholesale shipments and the exit of its Denizen business, both the Americas and the U.S. were up 2%.
Despite the decline in first-quarter revenue, Levi’s reaffirmed its sales outlook for the year, which calls for net revenues to rise between 1% and 3%.
“Both newness and strength in our core offerings are fueling consumer demand and driving meaningful market share gains,” Gass stated.
She was also upbeat during the earnings call.
“In a nutshell, I’d say we’re feeling better about the consumer than we did three to six months ago,” she told analysts.
In January, Levi’s launched an initiative to accelerate profitability and reduce costs that included global workforce cuts and the phase-out of its Denizen brand.
“Our global productivity initiative, Project Fuel, is progressing well and improving the profitability of the company,” stated Harmit Singh, chief financial and growth officer. “Looking forward, we are encouraged by trends in our business, around the world, including in Europe. As a result, we are confident in our ability to return the topline to mid- single-digit growth in the second half of this year and are increasing our full year EPS expectations.”
Levi’s said it now expects adjusted earnings between $1.17 and $1.27 per share, compared to its previous range of $1.15 to $1.25. It reaffirmed its forecast for net revenues to rise between 1% and 3%.
Levi Strauss & Co. designs and markets jeans, casual wear and related accessories for men, women and children under the Levi's, Dockers, Signature by Levi Strauss & Co.TM, Denizen and Beyond Yoga brands. Its products are sold in more than 110 countries worldwide through a combination of chain retailers, department stores, online sites and a global footprint of approximately 3,200 brand-dedicated stores and shop-in-shops.