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Levi Strauss Adapts To Shifting US Waistlines And Supply Chain Challenges

Levi Strauss recorded better-than-expected revenue and profit in the second quarter, buoyed by accelerated omnichannel and eCommerce capabilities alongside consumer demand for refreshed wardrobes post-pandemic.

The apparel giant said Thursday (July 8) that its net revenues for the three months ending May 30 were $1.3 billion, up 156 percent versus the same period in 2020. eCommerce continued to grow, reaching 42 percent year-over-year growth; net revenues through all digital channels grew 75 percent.

Compared to 2019, eCommerce has grown by 71 percent, but still represents just 8 percent of Levi Strauss’s total revenues.

The U.S. was by far the company’s strongest market, CEO Chip Bergh noted, with growth of 4 percent versus the second quarter of 2019, prior to the pandemic. China also returned to growth that is comparable to 2019, he said, and although Europe’s economy has been slower to reopen because of recent outbreaks of COVID-19, “it’s clear that consumer demand remains strong.”

The company, which has a market value of $11 billion, has also grown its loyalty program, and the Levi Strauss app saw a 20 percent increase in downloads between the first and second quarters.

The bulk of the increased revenues and margins, the company said, were driven by a higher proportion of sales from direct-to-consumer (DTC) channels, as well as price increases that Levi Strauss implemented across all its channels.

Chief Financial Officer Harmit Singh said all the factors driving the company’s revenue growth “are structural and sustainable.”

“DTC sales, both brick-and-mortar and digital, have our highest gross margins,” Singh told investors and analysts. “And our strategies will drive DTC to a higher percentage of our total business in the years ahead.”

Another second-quarter highlight, Bergh said, was that Levi’s largest distribution center, in Henderson, Nevada, became the company’s first owned and operated facility to fulfill orders for eCommerce, retail and wholesale channels. Over time, the CEO said, the company plans to continue leveraging its own distribution centers, “which will drive more agility and inventory positioning, reduce lead times and accelerate expansion of eCommerce margins.”

‘A New Denim Cycle’ 

Bergh told investors and analysts that he’s confident Levi Strauss is “in the early innings of a new denim cycle” as the pre-pandemic casualization trend continues to drive an industry-wide resurgence in denim.

“As the pandemic fog lifts and more people get vaccinated to return to social activities, as lockdowns lift, people are now starting to go back to the office in many parts of the world,” he said. “All of this creates a new wardrobe opportunity.”

Additionally, Bergh noted, approximately 35 percent of U.S. consumers changed waist sizes during the pandemic.

“Some of it is up and some of it is down, but either way, it creates another reason for people to go out and update their wardrobe.”

In particular, Levi Strauss has seen its first baggy-fit jeans, which were introduced prior to the pandemic but took hold as people sought comfort during lockdowns. Looser, baggier fits were almost half of both men’s and women’s sales for the company in the second quarter.

“And, you know, as bottoms silhouette changes, it also has an impact on tops, it has an impact on footwear, and it really does present an opportunity to update people’s wardrobes broadly beyond just the denim bottoms,” Bergh said.

Bergh said the 170-year-old San Francisco-based company is also beginning to use artificial intelligence (AI) to forecast initial demand for each season, which, when scaled, will enable more precise inventory management, lead to fewer markdowns and clearance, and prevent waste. This work is in addition to Levi’s ongoing work with AI on pricing and promotions, something other retailers are also utilizing as inflation remains high.

Additionally, Levi’s now accepts PayPal and Venmo in all U.S. stores in an attempt to extend the company’s reach, Bergh said, especially to Generation Z consumers. According to PYMNTS Connected Economy research, 62 of highly connected consumers use PayPal in their mix of payment methods, whereas 32 percent of lightly connected consumers do so.


Despite labor shortages and supply chain woes that threaten to disrupt the back-to-school shopping season — one of the biggest shopping events of the year — Bergh said Levi Strauss is well positioned.

Though the company has seen some impacts from supply chain disruptions, he said the impact was limited to about half a point of growth for the second quarter, or around $8 million.

“Our expectation for the second half is there will continue to be challenges,” he said, but the company plans to begin air-freighting more and it is now shipping most of its products into the U.S. through the East Coast, with the delays built into lead time.

“So we’re fully expecting that we’re going to be able to manage the back-to-school volume as that comes upon us, and holiday as well,” Bergh said.

In advance of back-to-school, the CEO said Levi Strauss is also expanding its Red Tab label partnership with Target to 500 additional stores, bringing the total distribution of the Red Tab label to 800 locations.

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