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Levi's: More News of Bifurcation and The Shift from Digital to Physical

Thomas Paulson
Jul 8, 2022
Levi's: More News of Bifurcation and The Shift from Digital to Physical

Levi’s reported +20% organic revenue growth and profits up 33% for its May-ended second quarter with CEO Chip Bergh saying, “Strength in our global brick-and-mortar business was driven by both mainline and outlet stores across geographic segments as a result of increased foot traffic and store expansion as well as higher unit volumes and AURs. [W]e also benefited from a return of tourist traffic in many of our downtown locations, propelling growth in our flagship stores in key cities, including San Francisco, New York, Paris and London.”

  • Levi's U.S. wholesale business was up a strong +19%, reflecting strength in the denim category at its wholesale partner’s doors and the Levi's women's business posted a 30% increase.
  • On the U.S. consumer Bergh said that Levi's core Red Tab business has "not seen any softening" and that the company has not "heard really any concern about Levi's Red Tab" from its customers. Bergh continued, "The one soft spot in our business in the second quarter was Signature and Denizen, our two value brands (which are sold at Target, Walmart, and Amazon). Those two brands, which were up in the first quarter, were down mid-single digits in the second quarter. So there's some evidence that the value consumer or the low-income consumer is really starting to feel the squeeze…But Levi's Red Tab at Target is still doing really well. And we feel really, really good about how we're positioned right now in wholesale. We haven't seen any signs of cracks.”
  • Levi's CFO Harmit Singh shared, “Our own e-commerce…was down…because we were lapping some really strong numbers, as well as the consumer heads back to the stores, there's a bit of the online shopping shifting to the stores, and we saw that in the form of higher traffic.”
  • On moving beyond the industry’s supply chain challenges, Singh noted that “[s]upply chain issues are getting better but that we're not going to be out of the wood this year. Hopefully, next year is getting better.”
  • Lastly, Levi’s new U.S. stores are performing well and their plans to open 70 (globally) net new locations per year remain intact (which we discussed here).

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Thomas Paulson

Director of Research and Business Development, Placer.ai

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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