With a tough 2023 within the rearview mirror, Levi Strauss & Co. this 12 months is making an attempt to sort out its issues with new pants.
That consists of pants with lighter-weight denim; pants for girls that may be worn as high-rise or low-rise; and even nondenim pants that administration, throughout Levi’s
earnings name on Thursday, known as a “tech pant” for males with “moisture control and 360 mobility.” The firm additionally plans to increase its choices of Performance Cool pants supposed to maintain the wearer cool and dry on hotter days.
But as these merchandise roll out, the retailers that account for many of Levi’s gross sales are nonetheless cautious about packing their cabinets with new attire — although Levi’s executives pointed to barely higher demand from outfitters in the course of the fourth quarter and vacation interval. And because the denim pioneer cuts prices, brings in new management and tries to be an even bigger e-commerce participant, Wall Street will now be digging round for indicators of a payoff.
“Ultimately, the market will be looking for evidence new strategies can drive accelerated growth,” Stifel analyst Jim Duffy stated in a analysis be aware on Thursday.
“We continue to believe in brand vitality and opportunities for extension. With product reflective of new direction arriving in the marketplace across 2024, the proof will be in consumer response,” he continued.
In an interview with MarketWatch on Friday, Duffy stated he was optimistic about Levi’s standing as a longtime model and stronger demand for its attire, skirts and different ladies’s clothes objects. But the extra merchandise an organization rolls out, he instructed, the extra it has to speculate to make them work — and the extra it must handle if gross sales falter.
“The risk, as I see it, is that more categories means more SKUs and more product that is fashion rather than core basic styles, and more investment and inventory that, if it doesn’t translate to the marketplace, could result in higher markdowns,” he stated, referring to the stock-keeping models by which retailers monitor stock.
Levi’s on Thursday stated it could lay off between 10% and 15% of its international company employees within the first half of this 12 months, a transfer supposed to avoid wasting $100 million in prices over that interval. The layoffs are a part of a two-year plan, referred to as Project FUEL, supposed to save cash and strengthen the a part of Levi’s enterprise that sells on to shoppers by way of its personal e-commerce community and its bodily shops, versus third-party retail operations.
The layoff announcement arrived days forward of Chief Executive Chip Berg’s departure from that position, with Michelle Gass taking on on Jan. 29. As the corporate tries to be greater than males’s denims, Gass, in Levi’s earnings launch on Thursday, stated she noticed a possibility to develop internationally, make Levi’s personal on-line and bricks-and-mortar gross sales a better precedence, and switch the model into a bigger “denim apparel lifestyle business.”
Levi’s shares fell after hours Thursday, after the corporate’s full-year revenue forecast got here in beneath expectations. The inventory rebounded 1.3% on Friday however continues to be down 10.3% over the previous 12 months.
Still, Levi’s direct-to-consumer gross sales jumped 11% in the course of the fourth quarter, and accounted for 42% of gross sales total. Duffy stated that the corporate has pushed deeper into its direct-sales enterprise as a result of it offers executives better perception into what shoppers need, in addition to extra management over the way it markets and sells its clothes. Cutting out different retailers additionally widens margins on gross sales, he famous.
Levi’s working margins have been larger within the fourth quarter. It additionally declared a dividend of 12 cents per share, payable in money on Feb. 23.
But gross sales in Levi’s wholesale section — the gross sales it will get from retailers who purchase Levi’s product, then promote it to shoppers — fell 2%. Better leads to the U.S. and Asia have been offset by a drop in Europe, the corporate stated.
Retailers have spent the previous two years making an attempt to clear undesirable garments from their stockrooms, and slicing costs within the course of, after spiking inflation restricted many patrons’ appetites to fundamentals.
As Gass prepares to take the reins, she sought to place a optimistic spin on retail-chain sentiment. “So net-net, overall, as a company, we’re exiting the year on a strong note,” Gass stated on the earnings name. “And U.S. wholesale, we’re encouraged. But as it relates to that channel, we’re not declaring victory yet. There’s been a lot of volatility this past year, some in our control, some outside. And so we are taking a cautious approach as we look forward.”