apparel

Despite Surging Sales, Levi Strauss & Co. Expects Decline Ahead

 

Levi Strauss & Co. turned in better-than-expected results for the fourth quarter thanks to new marketing efforts starring Beyoncé, retail expansion, and a healthier new-product pipeline. Net revenues rose 8% to $1.84 billion on an organic basis, which excludes the impact of foreign exchange rates, compared to $1.64 billion in the comparable quarter last year. And net income rose 44% to $183 million from $127 million in the year-ago period, with the company noting growth in every division.

Both top and bottom-line results beat expectations, and CEO Michelle Gass says the strength of the results shows that the company’s latest efforts are paying off. Direct-to-consumer sales did especially well, rising 19% overall and 11% in the U.S. That marks the 11th consecutive quarter of D2C gains.

advertisement

advertisement

Women’s clothing also improved, rising 12% to nearly $2 billion for the full year.

On a call webcast for investors, Gass said some gains come from the success of “Reimagine,” the ad campaign starring Beyoncé. “This partnership is having a significant impact on brand affinity within our target consumer demographics while supporting our focus on growing our women's business and owning denim lifestyle,” she said, adding that new chapters of the effort are coming soon. “A year ago, I shared my commitment to elevate our denim authority and evolve into a full lifestyle apparel brand through an expanded product pipeline and introduction of new innovative platforms,” she said. “I am pleased to share it's working.”

But the San Francisco-based company surprised observers with a decidedly less upbeat forecast for the coming months, expecting revenues to decline between 1% and 2%, with organic sales rising net 3.5% to 4.5%. Levi's cited uncertainty related to the macroeconomic environment, potential tariffs, changes in the tax code, and a worsening foreign exchange.

Gass also reiterated the company’s commitment to moving beyond jeans. With the global denim market expected to grow in the mid-single digit range, Levi’s is the market share leader for both men and women in the U.S. Yet she notes that apparel and denim are still under pressure, as consumers pull back on discretionary spending. “It's paramount for us to continue to maintain and grow market share,” she said. “This is about this evolution from denim bottoms to head-to-toe apparel rooted in denim. That expands our lens of what's possible.”

Next story loading loading..