Levi's jeans demand is 'stabilizing,' execs say. Is 'Levii's Jeans' by Beyoncé helping?

By Bill Peters

CEO also sees 'an evolution' to baggier styles and low-rise and wider leg openings, and says: 'We're feeling better about the consumer than we did three to six months ago'

Shares of Levi Strauss & Co. rallied after hours on Wednesday, after the jeans maker bumped its full-year profit forecast higher, helped by cost cuts, improving executive optimism about shoppers and better demand for products new and old in the U.S. and abroad.

But - amid speculation from analysts and social media - what about the impact from Beyoncé?

When asked by an analyst on Wednesday about any possible sales boost from "Levii's Jeans" - a song off "Cowboy Carter," the pop megastar's new album released days ago - Levi's (LEVI) Chief Executive Michelle Gass spoke only broadly, while noting the company was having "a moment."

"I would just say that denim is having a moment and the Levi's brand is having a powerful moment around the world," she said. "You see head-to-toe denim everywhere around the world. Western is really trending in fashion and in music."

She said that Levi's has tried to remain a cultural cornerstone, and added that there was no stronger proof of the brand's relevance than getting a mention from Beyoncé.

"I don't think there's any better evidence or proof point than having someone like Beyoncé, who's a culture shaper, to actually name a song after us. So we're super proud of that."

Prior to the results, in a nod to the artist, Levi's added a second "i" to its Instagram profile name. The company did not respond to requests for information about whether it had spoken with Beyoncé or her representatives about the song, or whether the two were collaborating. The company's fiscal first-quarter earnings release contained no mention of the artist.

As for the results themselves, sales still fell during the quarter. But even with consumers still cautious about replenishing their wardrobes with new clothes, Levi's stuck with its outlook for sales growth of 1% to 3% for its fiscal year. The company said it now expected adjusted per-share profit of $1.17 to $1.27, compared with a prior forecast of $1.15 to $1.25.

Shares rose 8.2% after hours on Wednesday.

"Both newness and strength in our core offerings are fueling consumer demand and driving meaningful market share gains," Gass said in Levi Strauss' earnings release.

"The momentum in our global DTC business continues, with DTC up in all segments," she added in that statement. "Our efforts to stabilize our wholesale business are delivering results."

Levi's direct-to-consumer, or DTC, business sells clothes through the company's own physical and online stores. Its wholesale business, which sells to outside retail stores, has faced caution from many larger chains, which have held off on loading their shelves with new apparel amid softer demand. When prices for groceries and other basics shot higher in 2022, clothing demand suffered, as shoppers found themselves with less to spend.

Levi's is trying to be more of a "DTC first" company, and jump-start consumer enthusiasm by rolling out new, more comfortable denim, as well as items like dresses. It is also cutting costs. The company in January said it would lay off between 10% and 15% of its corporate staff. Gass took the helm later that month.

During Wednesday's call, Gass said that market-share trends in its U.S. jeans segment had "stabilized," after two years of weaker demand and discounting. She also called out an array of gains in new products - something the company has been leaning into in an effort to attract more reserved customers.

Among the new products she said were gaining traction were denim skirts, dresses and jumpsuits. She said the company was drawing younger consumers, and rolling out T-shirts and polos. The company, however, said it would wind down its small footwear segment.

And after skinny jeans dominated the prior decade, she said preferences showed signs of moving in the opposite direction.

"We continue to see an evolution to low-rise and wider leg openings," she said.

Later in the call, she added: "We're also in the denim cycle of 'looser, baggier.' Definitely seeing it with women, but also seeing it in men. So we're excited for men to expand their closets with looser fits as well."

Levi Strauss' first-quarter results also beat expectations. Levi's reported a net loss of $10.6 million, or 3 cents a share, due to millions in charges related to layoffs and cost cuts announced earlier this year. That contrasted with a $114.7 million profit, or 29 cents a share, in the same quarter last year.

Factoring out the restructuring charges and other costs, Levi's earned 26 cents a share during the quarter. Revenue fell 8% to $1.56 billion.

Analysts polled by FactSet expected Levi Strauss to report adjusted earnings per share of 21 cents on sales of $1.55 billion.

"In a nutshell, I'd say we're feeling better about the consumer than we did three to six months ago," Gass said during the call.

-Bill Peters

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04-03-24 2012ET

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