• by Sarah Mahoney  @mahoney_sarah, July 10, 2023

In many ways, Levi Strauss’s second quarter financial report offers plenty to brag about. Its D2C sales channel is outperforming, sales in China are bouncing back, and for the first time in more than 12 years, it’s claimed the No. 1 spot in the U.S. women’s jeans business.

But that wasn’t enough to offset the pounding the apparel giant has taken in wholesale channels, pushing sales down 9% to $1.3 billion, compared with $1.47 billion in the second quarter of 2022.

The company posted a loss of $2 million, compared to net income of $50 million in the comparable period.

While those results fell within the range of Wall Street expectations, the company lowered its forecast and now anticipates full-year revenue gains of between 1.5% and 2.5%.

“The U.S. is a story of two different channels,” says Chip Bergh, president and CEO, in a conference call webcast for investors. “Wholesale is very soft, with lower to moderate-income consumers clearly being squeezed. Sales of our value brands are down in the double digits. That moderate-income consumer is having to make tough choices — a summer vacation or a pair of jeans.”

In the Americas, sales dropped 22%, with wholesale revenues plunging 33%. Yet sales in D2C channels, including its 3,200 stores, are up 13%, and e-commerce gained 20%.

Bergh also tried to put the results in perspective, pointing out that even after the wild swings in denim sales, ranging from the pandemic period when everyone wore yoga pants and the re-opening stampede for new jeans, “the denim category overall is 12% bigger than it was in 2019, on a dollar value basis.”

He also elaborated on market share gains, with men’s jeans advancing its No. 1 position to a 22% share. “And in women’s, we took the market share lead with 7%, the first time we are in first place in my 12 years with the company.”

In the premium category, jeans priced at $60 or more, the San Francisco-based company also gained a percentage point in share.

Bergh credited much of the strength to its massive “The Greatest Story Ever Worn” campaign, focusing on the 150th anniversary of its classic 501 brand. “It generated billions of impressions and drove exceptional demand.”