Levi Profits Up 56% Over 2019 As Denim Trend Continues

Chip Bergh, president and CEO of Levi Strauss & Co LEVI . (Levi), said in the third quarter (Q3) earnings call that the strong demand for denim has driven revenue up 41% versus 2020 and 3% over 2019. Since many stores were closed during the pandemic last year, comparisons are made to 2019. Net profits were up 56% compared to 2019. The digital channels were a large contributor to the growth in Q3 with revenue up 76% compared to 2019 and over 10% last year.  Digital sales represented approximately 20% of total third quarter revenues.

Levi has built strategies to defend against supply chain issues

Bergh discussed supply chain challenges but explained that Levi’s global diversity sourcing strategy has been a competitive advantage: “Cross sourcing has been a successful initiative and allows us to quickly shift production as issues arise.” Levi was proactive, for example, in moving shipments to the east coast as the west coast ports became congested. Through strong vendor partnerships and agility in its production and distribution models, Levi has been able to minimize the impact of the supply chain on inventory holdings which were only down 4% to last year.  

DTC and digital growth drive profits

Direct to consumer and digital growth has positively impacted the gross margin which is 57.6% compared to 54.3% last year and 53% in 2019. Levi’s pricing strategy, ability to minimize out-of-stock through their global diversity sourcing strategy and focus on its direct to consumer business will continue to bring profitability growth moving forward. 

Beyond Yoga partnership announced in August

Levi has signed an agreement to purchase Beyond Yoga. According to the announcement, the acquisition will bring the Beyond Yoga brand to more consumers through direct-to-consumer expansion, including brick-and-mortar retail, gender and category growth, and further development of the wholesale footprint with premium partners. 

As Levi enters the activewear category, the partnership will help the growing women’s category which is projected to become 50% of the total business. Bergh discussed how Levi brings to the partnership the ability to scale and brand build: “Additionally, men’s yoga is a great opportunity for expansion and with our knowledge of that category, we can really help grow the business.” Bergh also discussed how the ethos of the Beyond Yoga brand aligns with Levi’s initiatives around body inclusivity and positivity. The premium athleisure apparel brand was founded in 2005 to promote body positivity, honoring and celebrating every body from XXS-4X. 

Future proofing the Levi brand

While many companies are challenged with supply chain issues, Levi has certainly seemed to stay ahead of the problems that other retailers in the industry have faced with its focus on a diversified sourcing strategy. Additionally, Bergh stated on the call that Levi has already negotiated cotton pricing through spring 2022, so the near-term business effects of decade-high cotton prices will be minimal for the company. 

Levi also discussed the sustainability report released in September with initiatives focused on climate, consumption and community: “Levi Strauss & Co. has been in business for more than 168 years because we make durable products that are built to last and because we proudly adhere to a guiding philosophy of profits through principles across our operations,” said Bergh in the press release last month. Levi’s stakeholder approach allows the company to contribute to a safer environment and sustainable future.