A Levi’s store at the Orlando Vineland Premium Outlets in Florida.
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In a lyric on her latest album, Beyoncé sings, “Denim on denim, on denim, on denim.”
Levi Strauss Buyers take this advice to heart. Levi Strauss executives are thrilled.
Western clothing is booming as consumers opt for top-to-bottom denim looks, the iconic 171-year-old clothing maker said Wednesday. As the style continues to grow in popularity in the culture, its popularity is expanding into denim niches — like shirts, skirts and dresses — that fall outside of Levi’s widely known blue jean offerings.
“The growing popularity of Western clothing is at an all-time high,” CEO Michelle Gass told analysts Wednesday evening after the California retailer reported its latest earnings report for the quarter ended May.
The Western renaissance has gained traction in recent months, sending stylish shoppers searching for pieces like jeans, boots and cowboy hats. Levi’s scored a major hit when its jeans brand was featured in Beyoncé’s song “Levii’s Jeans,” released earlier this year.
Aside from Beyoncé’s chart-topping album Cowboy Carter, the increasing ubiquity of Western style is also linked to a clothing line introduced by Beyoncé Louis Vuitton Earlier this year and Taylor Swift’s ongoing Eras Tour.
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Gass, who took over as CEO of Levi Strauss earlier this year after previously serving as CEO at Kohl’shas touted how denim is having a moment in the popular imagination and western clothing is becoming more trendy across the culture.
More specific data revealed during the company’s earnings call on Wednesday showed how Levi Strauss is capitalizing on demand for denim beyond its popular “501” jeans. Sales of denim skirts, jumpsuits and dresses at least doubled in the last quarter, Gass said. Sales of western shirts have also increased significantly, particularly in the women’s segment, she said.
Levi is finding success with a new strategy that, as the 55-year-old executive described, involves dressing customers from head to toe in jeans.
“Our new focus is on continuing to own jeans, but on evolving those jeans from the ground up,” Gass said on CNBC’s “Mad Money” late Wednesday. While she noted that the denim skirts and dresses categories weren’t a big deal for the company in the past, “now they’re exploding,” she said.
The denim craze is setting the bar high on Wall Street
To be sure, the well-documented denim craze alone doesn’t necessarily impress Wall Street. Levi Strauss plunged more than 15% on Thursday in response to its latest results, its second-worst day since going public in early 2019.
Levi Strauss posted sales of $1.44 billion in the fiscal second quarter, slightly missing the $1.45 billion consensus forecast of analysts surveyed by LSEG despite the denim boom. The company’s chief financial officer told CNBC that the loss in sales was due to unfavorable exchange rates and weakness in the Dockers brand.
On the other hand, Levi Strauss earned 16 cents per share (excluding items), above analysts’ average estimate of 11 cents.
Over the year through Wednesday, stocks had risen on enthusiasm for cotton fabrics and the resurgence of Western clothing. After Thursday’s decline, the stock is still up more than 18% year-over-year. For comparison: shares of Kontoor brandsthe parent company of denim brands Wrangler and Lee, are up 5% year to date.
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Levi Strauss, year to date
Wells Fargo analyst Ike Boruchow said Levi’s second-quarter release was “simply not good enough for one of the most crowded long positions in the space.” In other words, the company missed the admittedly high bar, he said.
Paul Lejuez, an analyst at Citigroup, said Levi’s last quarter was good, but cited the performance of its wholesale business and the possibility that sales in Europe will continue to weaken in the second half of the year as concerns.
Lejuez pointed to several tailwinds as reasons for optimism about the stock. Two of his reasons for generating excitement – new styles and fits – are common for a clothing manufacturer.
Lejuez’s last was more unique: Beyoncé.
— CNBC’s Gabrielle Fonrouge and Julie Coleman contributed to this report
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2024-06-28 13:36:57
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