Levi Strauss & Co. busted out in the second quarter with large increases in margins and profits as sales improved and costs came down.
Chip Bergh, president and chief executive officer, noted that second-half performance might be “more muted,” however, as year-on-year reductions in the cost of denim and savings on the decision to discontinue the Denizen brand in Asia will largely be behind the San Francisco-based apparel giant.
Additionally, he noted, because Levi’s fiscal year ends just prior to Black Friday, the company will lose out on the benefits of the busy shopping day this year, although it will get much of that back in fiscal 2014, when two of the post-Thanksgiving dates will be recorded.
In the three months ended May 26, Levi’s profits more than tripled to $48.1 million from $13.2 million in the year-ago quarter.
Revenues rose 4.9 percent to $1.1 billion from $1.05 billion in the 2012 quarter and gross margin, helped by reductions in cotton prices and the company’s own cost-cutting initiatives, grew 400 basis points to 49.9 percent of sales from 45.9 percent.
The boost in gross margin came from the company’s continued expansion at retail and a reduction in cost of goods sold, which fell 2.9 percent in the quarter, to $550.2 million.
Retail accounted for about 20 percent of company sales upon Bergh’s arrival in September 2011, a figure that has moved to 24 percent and is poised to go higher as the company builds on its e-commerce platform. “Our owned-and-operated e-commerce activity has moved from 2 percent of sales to 3 percent off a very small base,” he said. “It’s part of our goal to become a world-class retailer and we’re moving in that direction. We had double-digit growth for retail in the Americas; retail growth is gross-margin accretive and retail allows you to bring your brands to life in a way we can control.”
While the bulk of the company’s retail activity has been with its Levi’s brand, Bergh said the firm is considering doing more direct-to-consumer business with Dockers, which has a “limited, predominantly outlet” retail presence.
Bergh said that, as part of the company’s “expand for more” strategy, it is looking for ways to build on its presence in women’s, currently about a quarter of the business. The Revel program of body-shaping jeans unveiled this month, which will hit Levi’s stores for fall, will offer not only innovation in product but also, opening at $98, a higher price tier to the assortment.
“Clearly, to build on revenues, we have to find ways to drive growth through meaningful innovation and, after testing it with thousands of women, we know this brings significant innovation,” he said, adding that the company hasn’t yet decided when it might roll it out with its wholesale customers.
A key to Levi’s growth in the quarter was the strength of several of its core businesses — men’s Levi’s around the world, Dockers bottoms in the U.S. and the wholesale business in the U.S., the ceo noted. Not only was the company up against generally soft year-ago numbers, but last year’s second quarter was especially difficult at J.C. Penney, which had yet to institute Levi’s shops-in-shop.
The quarterly sales increase included an 11 percent gain at retail and a 3 percent increase in wholesale volume. While down slightly in the challenging Europe and Asia-Pacific markets, sales in the Americas rose 10.1 percent to $666 million. Both wholesale and retail revenues declined in Asia-Pacific, while retail helped overcome wholesale weakness in Europe. Operating income rose in all three regions.
For the first half of the year, net income rose 148.5 percent to $155.2 million from $62.5 million. Revenues were up 1.5 percent to $2.25 billion.
“What he has done at Vuitton is really exceptional,” said @gameofthrones’ actress Gwendoline Christie on @mrkimjones’ final show for @louisvuitton. “He has rebooted luxury in terms of making it commercial, viable and contemporary. And most importantly artistic. He has never compromised his artistic vision for the sake of commodity.” (📷: @zefashioninsider)
After seeing a demand for men’s wear from its customers, British contemporary women’s wear label @ariesarise has added a men’s wear component and will launch a unisex collection with @mrporterlive. The 20-piece collection includes jackets, denim, logo T-shirts and more with deconstructed ‘90s vibes. Set to launch on January 18, you can shop the pieces on Aries’ website and on mrporter.com. #wwdfashion
“And so spending so much time with a character who thinks like that, inevitability you try and analyze yourself and go back and think about your own demons and dark chapters that you had in your life,” says @thedanielbruhl of his role in TNT’s “The Alienist.” The show, set in the Gilded Age of New York, also stars Dakota Fanning and Luke Evans. Head to WWD.com to read about how 39-year-old Brühl prepared for the role and why he thinks the show is so relevant to today #wwdeye ( 📷: @Eriktanner)
Now that Celine Dion’s collection has topped $10 million in sales, the pop superstar, fashion icon and newly-minted industry player is eyeing growth in Asia. Read the full report by @tiffanyap, link in bio. #wwdnews #celinedion
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
Among the familiar faces at @off____white’s show was a surprise figure: Japanese artist @takashipom, pictured here on Wednesday morning. Other show-goers included @jerrylorenzo, who spoke about his upcoming project: a @nike collaboration for back to school, with designs inspired by his childhood on the West Coast. Sitting in the front row were Future, Don Crawley, @miguel and more. See the rest of the photos on WWD.com #wwdeye (📷: Stephane Feugere)
According to @laurentsai, former “Terrace House: Aloha State” cast member, she didn’t know she was auditioning for the Japanese version of “Real World.” “I was telling a couple of my friends and someone’s like, ‘That sounds a lot like Terrace House.’ I was like, ’No it can’t be.’” Turns out, it was. But Tsai isn’t just a reality star — she’s an illustrator who has worked with Starbucks Japan and most recently, she’s dipping her toes into the fashion world. Head to WWD.com to read about her time on the show, modeling and her art. #wwdeye (📷: @danieldorsa)
More changes are coming to New York Fashion Week: Beginning with the spring 2019 collection, @alexanderwangny will move his New York show to June from September, adopting a biannual schedule with collections shown in June and December. Additionally, the @cfda is planning for an official summer/winter fashion season taking place as soon as June and December 2018. Read more about the upcoming changes on WWD.com. #wwdnews #wwdfashion (📷: @slovekinpics)