Challenges persist in the denim industry in 2024, and those struggles were evident in Levi & Strauss Co.’s Q2 earnings. Nevertheless, the brand is optimistic that its transformation into a digital and direct-to-consumer retailer will bear fruit.

Levi’s second-quarter net revenue of $1.44 billion fell shy of analyst expectations of $1.45 billion. Still, that marked an increase of 8% over the same period last year. The company noted that when adjusting for wholesale shipments related to its U.S. enterprise resource planning (ERP) implementation, net revenues showed 1% growth year over year — and 2% growth when calculated in constant currency.

Other highlights from Levi’s earnings report included:

• Levi’s reported net revenues in 2024 are expected to be up 1% to 3% year over year, and probably toward the upper end of that range.
• Cash and cash equivalents were $641 million, while total liquidity was approximately $1.4 billion.
• Total inventories decreased 7% on a dollar basis and 19% excluding the impact of modified terms with the majority of suppliers, which now results in the company taking ownership of inventory for goods brought into the Americas closer to the point of shipment rather than destination.

“The core of our business remains very healthy,” said Levi’s CEO Michelle Gass on the earnings call with shareholders. She specifically pointed to the strength of some of their legacy products like the 501 brand.

“Our original icon, the 501, continues to deliver impressive growth, up 16% in DTC, in Q2,” Gass said.

Levi & Strauss ecommerce sales by year

Levi’s online sales in Q2

Levi’s has been undergoing a strategy that emphasizes more direct-to-consumer sales as opposed to its long-time strategy of its jeans being sold in retailers like Macy’s and T.J. Maxx.  The direct-to-consumer (DTC) strategy was a bright spot, seeing revenues increasing 11%. Its women’s DTC channels saw a 22% increase.

Revenues from ecommerce grew 19% on a reported and constant-currency basis, reflecting double-digit growth across the Levi’s and Beyond Yoga brands. DTC comprised 47% of total net revenues in the second quarter, down 1% from Q1.

Harmit Singh, chief financial and growth officer at Levi & Strauss, painted an especially bullish picture of the company’s ecommerce and digital channels on the conference call.

“Our ecommerce business is on fire,” Singh said, crediting the company’s internal teams with driving loyalty, driving higher conversion and fixing the fundamentals. The company’s Beyond Yoga brand has seen one of the biggest increases in digital sales.

Singh said that the DTC of the company’s business is growing in profitability.

“DTC continues to not only be our fastest-growing business, but is also seeing real improvements in profitability, with operating margins increasing more than 300 basis points during the quarter,” Singh stated. “This includes a significant improvement in ecommerce profitability.”

Potential signs of consumer caution

While Levi & Strauss leaders voiced general confidence in continued growth, inflation continues to be a drag on consumers.

Singh warned that consumers are “generally cautious” and aren’t spending a lot on discretionary items.

Levi’s is No. 162 in the Top 1000, Digital Commerce 360’s ranking of North America’s leading retailers by online sales, where we classify it in the Apparel & Accessories category. Digital Commerce 360 projects total ecommerce sales for Levi & Strauss in 2024 will be $576.75 million.

Do you rank in our databases? 

Submit your data and we’ll see where you fit in our next ranking update.

Sign up

Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News. Follow us on LinkedIn, Twitter, Facebook and YouTube. Be the first to know when Digital Commerce 360 publishes news content.

Favorite

The post Levi & Strauss reports 19% ecommerce growth in Q2 earnings as overall sales miss expectations appeared first on Digital Commerce 360.