Levi's benefits from new jeans cycle

Levi’s performed well above expectations in the second quarter, helped by a pick-up in demand for jeans in new styles. The fashion manufacturer expects to return to pre-pandemic levels as early as the third quarter.

Store closures in Europe

Levi’s posted sales of 1.28 billion dollars (1.1 billion euros) in the three months to May 30, still 3% lower than during the same period in 2019, but significantly better than expected. Analysts were expecting sales of around 1.21 billion dollars (1 billion euros). The profit was also considerably higher than analysts had forecast.

Sales in the US and China even exceeded 2019 levels, but in Europe the engine sputtered due to ongoing store closures caused by the health crisis. Around a third of European stores and 17% of global locations remained closed during the quarter. Currently, 92% of the global store network has reopened.

Wide legs

A new denim cycle is behind the strong results. In recent months, tight-fitting trousers have gone out of fashion and shoppers are opting en masse for loose-fitting, wide-leg and flared jeans instead. Many consumers feel the need to completely refresh their wardrobe, says the jeans label. “We are seeing good evidence of the new denim cycle driven by the looser and baggier fits. […] That gives us a lot of optimism about the second half of this year,” CEO Chip Bergh told CNBC.

The US label also said it has strengthened its wholesale business by investing in relationships with key partners, such as Nordstrom, and exiting stores that are synonymous with price cuts. Wholesale sales rose 167% in the quarter from a year earlier.

For the second half of the year, Levi’s expects sales to increase 28% to 29% from a year earlier, and 4% to 5% from 2019. The company did not give specific estimates for the full year, but said sales should be close to 2019 levels.