Few American brands have a legacy to match Levi Strauss Inc., which recently celebrated the 150th anniversary of its 501 jeans — and, by extension, the birth of one of the few true iconic styles.
There’s enough brand there that, even though the company needed to cover its logo on Levi’s Stadium during the World Cup because it wasn’t an official sponsor, everyone knew the secret as the covered logo retained its well-known batwing shape.
“We had to cover it up,” said Michelle Gass, president and chief executive officer, in an interview as the company topped second-quarter profit and sales expectations and raised its outlook. “The team recognized that, saw the moment, was super fast and agile, leaned in, posted it on social media. The rest is history, but we’re up to about a billion impressions on that.”
Getting that much credit for not being there is a trick.
But the company has proven it’s good at learning new tricks as it continues to transition from a primarily men’s bottoms business to a head-to-toe fashion brand.
Levi’s second-quarter net income from continuing operations — Dockers is being held for sale — rose 18.8 percent to $95 million from $80 million a year earlier.
Adjusted profits tallied $110 million with earnings per share of 28 cents, 4 cents ahead of the 24 cents analysts forecast, according to Yahoo Finance.
Revenues for the quarter ended May 31 rose 8 percent to $1.6 billion.
But it was a tough day on Wall Street for fashion generally and Levi’s stock fell 5.6 percent to $23 in after-hours trading.
Organic sales increased by 6 percent with the Americas up 7 percent, Europe down 1 percent due to a distribution center change and Asia up 12 percent. The Beyond Yoga business, bought in 2021, grew by 16 percent.
Michelle Gass
Gass said that “momentum’s building and we’re continuing to deliver consistent results.”
“It is about the strategies,” Gass said. “I’d say over the last couple of years, we’ve spoken to you about strengthening the foundation, making strategic choices and really amplifying the power of the Levi’s brand.
“We recognize that it continues to be a pretty dynamic time here in the U.S. and around the world,” she said. “But the starting point for us is at times like these, consumers do turn to brands that they know and that they trust. And for millions of people around the world, that’s Levi’s. People are still shopping, but what they’re going to gravitate towards is what’s new, the innovation, etc. And that’s what we’re bringing. We’ve had a deeper pipeline than probably we’ve ever had.”
She pointed to the summer offering, with lightweight fabrics, linen tops and more.
“We are executing and the consumer is responding,” Gass said.
And the CEO said Levi’s still has plenty of room to grow.
“Some of these opportunities that are key to our strategy, we’re still very underpenetrated,” she said. “Take tops as a category. That’s relatively new for us. So it’s a much bigger space for us to play in. And we’re seeing great growth in these new categories. We’re also starting to have all of this upside for a brand that has as much history and heritage, but we’re really changing the business model.”
That new, more retail-centric business model — 51 percent of the company’s sales come from its direct-to-consumer operation — is proving to be a better business model.
Harmit Singh, chief financial and growth officer, said: “We’ve probably generated in the first half more cash than we did all of last year. Inventory is down [7 percent on a dollar basis]. We’re growing, but inventory is down because we are really managing that well.”
And he argued that that discipline is extending throughout the operation.
“Every quarter, we talk about our brand — this is the strongest it’s ever been,” Singh said. “We don’t take that for granted. We have to go from strength to strength. I mean, last year, for example, people said, ‘Oh, Beyoncé, how do you lap it?’ And you’ve seen how we have lapped it. You can’t just sit back.”
