Levi’s Doubles Down on Denim as Revenue Jumps

Levi’s isn’t reinventing the wheel on its brand or assortment, and the payoff has been handsome as it doubles down on denim. 

After restructuring its corporate office, cutting more than 150 employees in San Francisco, and exiting its Denizen brand, the company’s tracking in the right direction, according to President and CEO Michelle Gass. The executive described Levi Strauss as being in the midst of a “significant transformational pivot,” as she spoke to analysts during the company’s quarterly update Wednesday. 

“While this evolution will span multiple years, our efforts are already positively impacting our quarterly results,” Gass said. 

The denim company reported revenue up 12 percent to $1.8 billion for its fiscal fourth quarter ended Dec. 1. That was driven by growth across all regions, including a 6 percent gain in its largest market the U.S.

Meanwhile, the company’s direct-to-consumer revenue jumped 19 percent in the quarter, marking the ninth straight quarterly increase. 

Net income rose in the quarter to $183 million, up from $127 million in the year-ago period. 

Operating as a direct-focused business has reached “a tipping point,” Gass said, “with accelerating sales momentum and an improvement in margins.” 

Levi’s expects to open 100 net new stores this year, with Thailand one of the more recent. It bowed in the recently ended quarter and serves as a pilot for the company. The store is playing up the full breadth of Levi’s denim categories and also touting premium collections.

“Results are encouraging, and this is just one example of the great potential we have in improving store productivity,” Gass said. 

Denim and Beyond

A major focus of the Levi’s strategy has been accelerating category expansion. 

The assortment is being refined with a minimum 15 percent reduction in the SKU count as the company looks to move faster in responding to trends. 

That includes taking advantage of the Western movement, with Western shirts rising 40 percent for women. There have also been recent collaborations with Stussy and Starter that have further helped expand. 

A big win for Levi’s was its September campaign, called “Reiimagine,” featuring Beyonce. The brand even appeared in the music artist’s “Levii’s Jeans” track, which was part of her “Cowboy Carter” album. 

Bottoms remain a big business for Levi’s. It’s just iterating on its offering. 

Loose fits account for more than half of its bottoms business. 

Still, Gass noted traction for tops and non-denim categories, the latter of which drives 44 percent of the company’s direct business. The company is also making more expansive moves into outerwear and sweaters. “Believe it or not, historically we’ve been a small player in even things like denim skirts, denim tops, denim jackets, denim dresses,” Gass said. “Early indications are super positive. We have a big opportunity there.”