Bloomingdale’s renovated denim floor.

In the fight for sales as the casualization trend shows no sign of abating, ath-leisure has been the clear winner over the last few years.

That is starting to change, however, as denim companies fight back and some shoppers are hanging up their leggings in favor of a fresh pair of Levi’s 501s.

This movement is starting to show up in the data. According to NDP’s consumer tracking service, women’s jeans sales grew 6 percent to $8.8 billion last year, while the overall jeans market increased 3 percent to $16.3 billion, following a 2 percent sales gains in 2017.

The research firm expects this trend to continue throughout 2019, stating in its “Future of Apparel” report that “the social, fashion-forward shopper will be the primary investors in women’s jeans as they seek comparable alternatives to their activewear.”

The denim companies are in agreement that there is a lot to play for.

“The world that we live in is really casualizing and that will benefit us and that will benefit denim going forward,” Scott Baxter, the chief executive officer of Kontoor Brands Inc., whose labels include Lee and Wrangler, told WWD in an interview last week.

But this revival doesn’t necessarily mean all the main U.S. players in the mass market have been riding high on the denim wave.

In fact, one has emerged top of the pack, while its main competitors are having to make significant changes in order to catch up.

Most triumphant is Levi Strauss & Co., which in March became the poster child for staging a meteoric return to the stock market, clocking in a sizeable valuation north of $8 billion.

This is quite a feat for a company that, after peaking in the Nineties, suffered a sales slump for many years amid competition from the likes of premium denim brands such as Seven For All Mankind and Citizens of Humanity.

The sales claw-back has been led by Levi’s ceo Chip Bergh, who took over the helm of the San Francisco-based company in 2011 and focused on growing the brand’s core jeans business, while expanding the women’s and tops businesses and building out its stores network and international presence.

His work clearly paid off. In 2018, the 166-year-old brand’s sales topped $5.5 billion and Bergh puts that down to the prestige of the label.

“The biggest advantage that we have today is the Levi’s brand,” he said at the release of the company’s last set of quarterly results in April.

Its rival Gap Inc. is taking notes, as revealed by the fellow San Francisco-based company’s ceo Art Peck at the retailer’s annual general meeting last week. He told shareholders while it isn’t often that a global company praises a competitor, he is hoping that the struggling chain can emulate the success of Levi’s recent comeback thanks to its household name.

“What I see in Levi’s is proof that a brand can be brought back to life and be relevant and that’s what I hope for Gap,” he said, adding that a brand’s heritage, relevance and history are its greatest assets.

This is not the first time Gap has looked to Levi’s to help its business, as the retailer started out selling Levi’s jeans in the late Sixties, but stopped after around two decades. It then focused solely on its own brand, but lately those have failed to connect with consumers after peaking in the Nineties under then-ceo Mickey Drexler with its memorable “Individuals of Style” black-and-white advertising featuring celebrities including Steve McQueen and Zsa Zsa Gabor.

Indeed, fourth-quarter results showed comparable sales at Gap were 5 percent lower and Peck told investors the quarter “did not live up to” what he knows the brands can deliver.

As part of its turnaround place, Gap hired Alegra O’Hare, formerly with Adidas, as senior vice president and chief marketing officer, and tasked her with crafting its denim message.

“Denim is the core of Gap brand and we will be leading with denim. We recognize the competition in the market for denim, but the market is large and the market is attractive and is the essence of Gap brand,” Peck said during a February call with analysts.

But that’s not its most dramatic move. That will be when Gap Inc. splits itself into two publicly traded companies later this year. One will be made up of the stronger Old Navy, while the other — a yet-to-be-named company — will consist of Gap, Athleta, Banana Republic, Intermix and Hill City. It will also result in the closure of around 230 Gap stores.

The reasoning behind the split is that the new company will create a clearer focus on what is necessary to deliver improved profitability in the more mature brands — Gap and Banana Republic — and be able to concentrate on the former’s denim offering.

Another member of the Nineties cool gang now facing an uphill struggle in its jeans business is Calvin Klein. Its December reveal that there were issues came as a shock to the market, which assumed everything was swimming along nicely.

The problems stemmed from the revamp of Calvin Klein under creative director Raf Simons, who took the brand in a fashion-forward direction that didn’t suit its customers — especially its loyal jeans customers.

“The category that was most influenced and kind of went off the rails was our jeans category,” Emanuel Chirico, ceo and chairman of Calvin Klein-parent PVH Corp., told WWD in an interview last week. Jeans account for about 15 percent of the brand’s total retail sales, although the percentage rises to 30 when looking at just the businesses that PVH operates directly.

Since Calvin Klein’s difficulties came to light, PVH Corp. has acted swiftly to fix the situation. Simons has exited and the group has been working on a redesign, stressing that a “marked improvement” will be visible in its products by fall.

“It’s a big component to PVH and I think that’s why we felt it so much, but I think we understand what needs to change and we’re starting to see some real benefits moving forward,” Chirico said. “We’re really feeling, as we get into fall ’19 and particularly spring ’20 we’re on the right track to get back to the brand.

“The brand is just so powerful; strong consumer awareness and intent to purchase is so strong that it is such a key asset for us and we have such a connection with the consumer,” he added. “Now it’s really a product execution issue on jeans, and I think that we’re on the way to put that behind us.”

Then there’s new kid on the block Kontoor Brands. Technically, its biggest labels Lee and Wrangler have a combined 200 years of experience in the denim market, but its parent company is just a few days old.

That’s because Kontoor is the spinoff of VF Corp.’s jeans and outlet business, which made its public debut last Thursday. VF executives designed to split the weaker jeans business, which also includes Rock & Republic, from its powerhouse brands, sneakers giant Vans and outdoorwear retailer The North Face.

While Vans’ global revenue was up 24 percent in the 2019 fiscal year and The North Face by 9 percent, Lee and Wrangler saw a 7 percent and 1 percent drop, respectively, and the hope is that by separating the companies, they can get the attention they need to thrive under expert management teams.

As Kontoor tries to regain sales, its new management team, led by ceo Scott Baxter, is focused on expanding the labels’ global footprint and connecting with the young consumer, as well as keeping the brands’ traditional buyers happy.

“One of the things that we’re doing is we’re globalizing Kontoor brands. Right now it’s being run as a regional company,” said Baxter, who added that Wrangler is not currently sold in China — a fact that he’s hoping to quickly change.

He also explained there’s a lot of room to play with Wrangler’s breakdown in sales. Eighty-five percent of Wrangler’s business is men’s, so there is significant potential to expand its women’s division.

His plans for Lee revolve around turning it into more of a lifestyle brand, a move that has helped its competitor Levi’s in its bid to claw back market share.

“Here in the United States, it [Lee] is more of a denim bottoms business and we have a chance to turn it into a lifestyle brand with tops and outerwear and accessories,” added Baxter, who divulged that in order to achieve these goals, management has for the first time placed a global designer at each brand.

“From our brands’ perspective, Wrangler and Lee have a real chance globally and we really like how we positioned those brands with the winners from the wholesale standpoint,” he added.

 

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