The latest earnings report from Levi Strauss reveals plenty of problems, ranging from too much inventory to challenging foreign exchange rates to tepid department store sales. Yet denim is holding steady, and strength in its direct channels is offsetting some of those issues. And the company announced a relatively upbeat outlook for the months ahead.
In more evidence that skinny jeans may live longer than the villain in a horror movie, two best-selling products last quarter are skinny-jeans styles. While looser-fit styles are a growing trend, "skinny jeans will never die,” says president and chief executive officer Chip Bergh.
For the fourth quarter of its fiscal year, the San Francisco-based company reported net revenues of $1.59 billion, down 6% compared to $1.69 billion in the same period last year, but flat on a constant-currency basis. Growth in the direct-to-consumer channel offset a decline in wholesale.
Adjusted net income for the quarter dropped 19% to $137 million, compared to $170 million in the year-ago period.
D2C net sales dropped 2%, while rising 6% in constant currency. Sales from stores now account for 31% of sales, while ecommerce amounts to 8%. When factoring out closures in the company's Russian operations, sales gained 10%.
Wholesale revenues dipped 8%, or 4% in constant currency.
The company reported impressive games in non-denim products, with combined net revenues for Dockers and Beyond Yoga up 28%.
"Our high margin D2C business is delivering exceptional results, and our diversification efforts provide additional growth drivers for sustainable long-term growth," said president and chief executive officer Chip Bergh in its announcement.
Industrywide, denim sales continued to grow, even as apparel contracted, and Levi's says it has increased market share in five of the last six years.
It now expects net sales of between $6.3 billion and $6.4 billion for fiscal 2023, reflecting an increase of 1.5% to 3%.
In a conference call to discuss the results, Bergh offered more details on the upcoming launch for the 150th birthday of the 501 jean.
That will include plenty of limited-edition drops and a variety of vintage styles -- many pulled right from its archives. And there's a plant-based 501 that offers an ecologically minded approach to the classic.
The marketing push for the celebration kicks off with the upcoming Grammy Awards, in a campaign that works closely with music events, celebrities and influencers.
"I'm excited about the ads," Bergh said. "We're putting all of our marketing muscle behind the 501 and celebrating the 150th. And everybody's got a great 501 story to tell."