Levi Strauss Shows Strong First-Quarter Revenue Gains

Manufacturing

As of Thursday, April 12, 2018

Levi Strauss & Co., that venerable denim brand founded in San Francisco in 1853, has been on a revenue roll recently as it diversifies its products and targets the international market for growth.

The company reported on April 10 that its first-quarter revenues jumped 22 percent from the same period last year to $1.3 billion. However, the denim brand had a net loss of $19 million due to a $136-million provisional noncash tax change due to the recently enacted federal tax cut. But adjusted net income nearly doubled in the first quarter to $117 million compared with last year.

“We had a great start to the year, and our strategies are clearly working,” said Chip Bergh, the company’s president and chief executive.

The company predicts that 2018 revenues will grow by 6 percent to 8 percent, with a trade war and tariffs putting a damper on a more optimistic outlook. “Trade and tariffs could have significant short-term impacts,” Bergh said.

The Levi’s brand saw 17 percent sales growth in all categories while the Dockers brand declined slightly. For the lower-priced Signature and Denizen labels, revenues were up 30 percent in the first quarter as women’s sales overtook men’s.

The Levi’s women’s business jumped 28 percent, with skinny jeans and high-waisted silhouettes bestsellers.

Direct-to-consumer revenues—which include retail stores and e-commerce—grew 24 percent based on an expanding retail network as the company opened 22 stores during the first quarter with a total of 100 new stores planned for this year.

During the fourth quarter of last year, Levi’s relaunched its store in the SoHo district of Manhattan. By the end of this year, it will open a new flagship store in New York City’s Times Square neighborhood at 1535 Broadway, replacing the 10-year-old flagship store located at 1501 Broadway.

Last month, Levi’s opened its first Latin American flagship store, located in the historic district of Mexico City on Madero Street.

Bergh said the company has been on a trajectory to offer more-diverse products, expand more into international markets and invest more in marketing and direct-to-consumer expansion. Offering women more tops to buy with graphic elements has been a winning strategy.

Revenues in the Americas—which include the United States and Latin America—were up 14 percent to $657 million. “This is the best quarter the Americas region has seen in recent history,” said Harmit Singh, the company’s chief financial officer.

Europe was one of the hot spots with revenue in the first quarter jumping 46 percent over last year to $453 million. “The business continues to go from strength to strength, driven by marketing,” Singh said.

China made up less than 5 percent of Levi’s revenues, but the company still has its eye on the market despite last year closing 150 of the unprofitable franchise retailers operating as stores within department stores.

The company is optimistic about the cost savings its new Project F.L.X. will deliver once it is fully operational on a global basis by 2020. Announced earlier this year, the program uses lasers instead of manual technology to fade jeans. Lasers can reduce the time it takes to distress a pair of blue jeans from two to three pairs an hour to 90 seconds a garment.