As America’s most iconic denim jeans brand, Levi’s has been at the center of culture since its inception in 1853.
Over a century and a half later, the denim garment maker remains relevant across all generations.
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Currently, Levi Strauss & Co. (LEVI) is one of the largest apparel companies and the largest pants maker in the world.
However, while some of its recent business moves may threaten its highly coveted titles, its latest strategy to increase revenues could be the company’s saving grace.
Michelle Gass, president and chief executive officer of Levi Strauss & Co., during as interview in New York City on April 5, 2024.
Levi’s publishes its Q3 earnings report for 2024, and numbers seem shakier than usual
For the last four quarters, Levi’s has successfully beaten analysts’ EPS expectations, and this quarter wasn’t an exception.
According to Levi’s Q3 earnings report for 2024, EPS was $0.33, compared to $0.28 in the previous Q3, an 18% increase year over year. Analysts were expecting earnings of 31 cents per share.
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However, recent changes within the company made its performance a bit shakier than in past quarters, which caused Levi’s to report flat revenues of $1.52 billion that failed to meet analysts’ projections of $1.55 billion.
The Americas region had a 2% revenue increase compared to the year prior, and Levi’s brand revenues were up by 5%, the highest growth in two years.
Direct-to-consumer revenues were up by 10% compared to last fiscal year, but wholesale revenues reported a 6% decline.
Levi’s puts its brands on the chopping block to increase revenues
In an effort to increase its revenues, Levi’s has been cutting costs by sacrificing its brands and reducing its inventory by 7%.
Last year, Levi’s strategically discontinued its Denizen brand while focusing on its Red Tab Target (TGT) store rollout.
However, Denizen’s exit weighed on Levi’s earnings, leading the brand to include adjusted numbers in its earnings to make up for the $15 million impact it caused.
After readjusting its revenues, the company reported a 1% positive growth, with an increase of 2% in the Americas.
But Denizen may not be the company’s only discontinued brand; another brand may also be on the chopping block.
According to Levi’s Q3 earnings call for 2024, the Levi’s-owned Dockers brand terribly underperformed.
This led the company to initiate a formal review to devise a strategic plan that could lead to the potential sale of Dockers in an effort to accelerate growth.
To help with this new strategy, Levi’s hired Bank of America (BOAPL) as its financial advisor.
“The Company has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any transaction or particular outcome,” stated the company during the earnings call.
On Wednesday’s market close, Levi’s stock was down nearly 3% and declined over 7% after it reported its earnings after market hours.
Levi’s announces its latest campaign in partnership with an American musical icon
Beyoncé may have given fans a subtle hint of her upcoming partnership when she dropped her latest album, Cowboy Carter, which included a song titled “Levii’s Jeans.”
On Sunday, Levi Strauss & Co. (LEVI) announced its new campaign, “Reiimagine,” in partnership with American singer-songwriter and businesswoman Beyoncé.
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The new campaign was inspired by one of Levi’s most iconic ads in 1985, “Launderette.” The ad originally starred a man but has now been revamped to feature Beyoncé, which might be due to the company reporting an 11% increase in its women’s sector.
“Women’s continues to gain market share and is now solidly in the number one position, which hasn’t been the case historically,” said Levi’s CEO and President, Michelle Gass, during Q3’s earnings call.
This latest campaign aims to fuel innovation and increase sales growth by capturing a bigger audience and driving further brand engagement.
Levi’s discloses its guidance with small projected growth
Levi’s projects net revenues to grow approximately 1%, and constant-currency net revenues are expected to increase by 1.5% to 2%.
EPS is projected to be at the mid-point of the previously guided range of $1.17 to $1.27.
“We are confident that the acceleration in sales in Q3 will continue into Q4. This will be driven by accelerated growth of the Levi’s brand, supported by a new marketing campaign, improvement in global wholesale, and continued momentum in DTC and Europe, along with the benefit from the 53rd week. However, our prior full-year expectations are being offset by headwinds in China, Dockers, and Mexico wholesale,” said Levi’s Chief Financial & Growth Officer and Executive VP, Harmit Singh, during the earnings call.
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