Levi Strauss & Co. is taking the opportunity as a newly publicly traded company to breathe fresh life into its brands and approach to business.
The new chapter the company is writing is being driven by changes in retail-consumer relationship and the push to expand its reach to new customers in new ways.
“Direct-to-consumer, which for us includes the brick-and-mortar stores and e-commerce sites that we operate, grew 14 percent for the quarter in total, and has now grown double-digits for 12 consecutive quarters,” Berg said. “Revenue growth from our brick-and-mortar stores was 11 percent, reflecting positive comp performance of existing stores as well as ongoing expansion of our store network internationally, while e-commerce grew 24 percent.”
Total net revenue for the first quarter ended Feb. 24 grew 7 percent to $1.44 billion. Levi’s said it plans to open nearly 100 new company-operated stores in fiscal 2019.
The company is expanding its omnichannel execution, having now rolled out RFID throughout the U.S. and U.K. RFID was first introduced in 2017 in response to feedback from consumers, the company noted in its Unzipped blog. When the team discovered the No. 1 reason shoppers left stores without buying anything was because they couldn’t find their size or color, it implemented an RFID system to help better track inventory and keep its stock up to date.
Berg said last week that the company will begin to roll out shop online, pick-up-in-store–one of the biggest trends in retailing today–later this year.
Another vital strategy, he said, is to diversify the business by expanding more into tops and women’s under-penetrated markets. Levi’s women’s business grew 18 percent in the three months ended Feb. 24–the 15th consecutive quarter of growth in women’s, with the last nine quarters topping 10 percent gains.
The total tops business, which generates more than $1 billion annually, grew 28 percent in the first quarter, driven by strong performance in sweatshirts and trucker jackets.
“Expanding our tops business is a key to becoming a lifestyle brand and the momentum we’ve been driving over the last few years demonstrates that we are making good progress,” Berg said.
More edgy products also performed well, he noted. Skinny jeans and high rise styles like the 711 skinny high-rise and Mile High did well in women’s. “We’ve launched our highest rise yet, the rib cage, and are really excited about the strong consumer response thus far,” Berg said.
The core business also stayed strong in the quarter. The Levi’s brand posted 10 percent revenue growth, “particularly impressive given we were comping 17 percent growth in the first quarter of 2018,” the CEO said. Growth was primarily fueled by women’s and tops.
“We’re also excited about new products, including the re-launch of Levi’s engineered jeans, a cult item that we’ve brought back from the 1990s in both the denim and non-denim, and it’s flying off the shelves especially internationally,” Berg told analysts.
The overall men’s bottoms business, the largest segment, was up 6 percent for the quarter.
“In the Levi’s brand, we saw a strong growth in more tapered silhouettes and styles like the 512 swim taper jean and the 502 taper that features fabrics with higher stretch content,” Berg said. “Despite continued door closures, wholesale grew in every region and our top 10 wholesale customers collectively grew 3 percent. Our top five mature markets collectively grew 10 percent, inclusive of our largest market in the U.S., which was up 9 percent.”
He noted that while “the underlying health of our business remains strong,…we’re still facing some headwinds, including anticipated door closures at traditional wholesale customers, unrest in Europe, as well as Brexit, continued uncertainty around China tariffs, and declines in U.S. retail traffic as we exited the quarter.”