Beyoncé’s latest album features a line about “denim on denim, on denim, on denim,” showcasing the enduring appeal of this fashion staple.
Customers of Levi Strauss are fully embracing this trend, much to the pleasure of the company’s leadership.
A rise in Western-inspired attire has prompted consumers to mix and match full-denim outfits, a shift that has particularly boosted sales of denim tops, skirts, and dresses, previously overshadowed by traditional jeans.
“The surge in Western fashion is setting record numbers,” remarked CEO Michelle Gass during a recent analyst meeting discussing the quarter results ending in May.
The revival of Western styles has been gaining momentum, leading to a heightened interest in items like denim pants, cowboy boots, and hats. Levi Strauss scored big when Beyoncé mentioned the denim brand in her song “Levii’s Jeans” earlier this year.
The resurgence of cowgirl and cowboy aesthetics has received further support from new collections from luxury brand Louis Vuitton as well as Taylor Swift’s popular Eras Tour.
After taking over as Levi Strauss CEO earlier this year following her tenure at Kohl’s, Gass is celebrating denim’s current prominence and the broader embrace of Western-style trends.
As per the earnings meeting disclosures, Levi Strauss is leveraging the heightened demand for denim, witnessing a significant increase in sales of denim skirts, jumpsuits, and dresses in the recent quarter, as shared by Gass. She also highlighted a notable rise in Western shirt sales, particularly in women’s clothing.
Gass views the strategic shift as a move to dress customers in denim from head to toe, expanding beyond the traditional jeans approach. On CNBC’s “Mad Money,” she noted the growing popularity of denim skirts and dresses, which, despite not being Levi’s main products previously, are now experiencing substantial growth.
Denim Trends Challenge Wall Street Expectations
Despite the strong denim trend, Levi Strauss’s shares plummeted over 15% following its latest financial report, marking one of its most significant declines since its 2019 IPO.
The company reported a revenue of $1.44 billion for the second fiscal quarter, slightly missing the estimated $1.45 billion projected by LSEG analysts, despite the robust denim demand. The CFO explained to CNBC that the shortfall was due to unfavorable currency exchange rates and weaker Dockers brand performance.
On the flip side, Levi Strauss outperformed expectations with earnings of 16 cents per share, excluding certain costs, surpassing the analysts’ 11 cents per share forecast.
Even with the recent drops, Levi’s shares have still surged over 18% in the past year, outperforming Kontoor Brands, parent company of Wrangler and Lee, which grew by 5%.
Wells Fargo analyst Ike Boruchow remarked that Levi’s second-quarter results were underwhelming for ‘one of the most overbought names in the sector currently.’ In essence, the company fell short of the high expectations set for it.
Citigroup analyst Paul Lejuez acknowledged the quarter’s positives but raised concerns about wholesale operations and potentially weak European sales for the remainder of the year.
Lejuez highlighted various positive factors for the company’s future stock performance, including new designs and fits—typical drivers of excitement in the fashion industry. He also pointed out the influence of Beyoncé as a unique element contributing to the mix.
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