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Why Levi’s Increased Prices 5% in Q2

From new denim constructions, weights and washes to the steps global mills are taking to reduce impact, Rivet's SS23 In Season Look Book: Denim & Trims has everything you need to know for a successful denim season.

Levi Strauss & Co. (LS&Co.) may have lost $127 million last year, but its latest financial reports show a promising future.

The company saw net revenues for the second quarter jump 156 percent to $1.28 billion, driving execs to believe that numbers for the second half of fiscal 2021 will be higher than they were in 2019.

Much of this optimism is thanks to a greater demand for denim. According to LS&Co. president and CEO Chip Bergh, the strong denim and casualization trends across the globe are fueling business growth.

Sales for men’s bottoms nearly returned to pre-pandemic levels in Q2, and women’s bottoms exceeded Q2 2019 revenue by 9 percent. Much of this growth comes from versatile styles, such as the XX Chino, up 246 percent, as well as looser silhouettes. Baggier fits account for almost half of both men’s and women’s sales this past quarter.

And the shift to baggy fits isn’t just a win for the denim category. “As bottom silhouettes change, it also has an impact on tops and footwear, and it really does present an opportunity to update people’s wardrobes broadly,” Bergh said during an earnings call with investors on Thursday.

Bergh noted that pandemic-related size fluctuations are also contributing to consumers’ drive to shop more.

“Consumers in the U.S. have changed waist sizes,” he said. “And some of them are up and some of them are down. But either way, it creates another reason for people to go out and update their wardrobe.”

Premiumization

Elevating the Levi’s brand is a strong focus for 2021. Levi’s strategically reduced its markdowns and increased pricing by about 5 percent in Q2 across all geographies and channels, which accounted for a gross margin increase of about one point.

“Our view is you [increase] pricing when the brand is resonating with the consumers, not when you need to,” said Harmit Singh, LS&Co. executive vice president and CFO.

Part of the brand’s premiumization strategy, the brand’s high-profile collaborations with Valentino, Miu Miu and Denim Tears have given it access to premium stores and features across leading publications.

“Demand for our premium products remains strong and we continue to expand that business with premium retailers, including Nordstrom where our men’s and women’s products can now be found in all stores,” Bergh said.

Additionally, alternative payment methods such as PayPal and Venmo—now accepted in all U.S. Levi’s stores—have made it easier than ever for consumers to purchase from the brand.

The company’s focus on consumer demand, coupled with its strategic partnerships and marketing, translates to a hopeful future. “As we look ahead, we are confident the strength of our business will continue,” Bergh said.

Marketing campaigns

Also fueling business growth is a slew of marketing campaigns expertly crafted for the Gen Z and millennial consumer base.

Levi’s Buy Better, Wear Longer campaign, which centered on responsible production and featured celebrities like Jaden Smith and Emma Chamberlain, garnered an “overwhelmingly positive” reaction. Following the campaign, the brand saw strong growth in average daily brand mentions across global social platforms and a significant lift in brand consideration and purchase intent after consumers engaged with the ad.

The brand further engaged with younger demographics with a virtual festival it hosted on May 20, 501 Day, to celebrate the birthday of the Levi’s 501 Jean. Featuring musical performances, meaningful conversations and DIY denim personalization and repair sessions, the event resulted in 4 billion impressions.

TikTok also played a crucial role in captivating Gen Z. Levi’s launched its global TikTok channel and generated more than 100 million views within its first six weeks on the app.