Jeans brand Levi’s evolving into retailer

Levi Strauss, better known as Levi’s, will be opening another 100 stores, mostly in Europe and China. The brand is doing extremely well and sold 7% more products in the past quarter.

Double-digit growth

American jeans label Levi Strauss generated 7% more profit in the first quarter of this year (until February 24th), reaching a total of 1.44 billion dollars (about 1.28 billion euros). Deducting currency effects, turnover in brick-and-mortar stores even increased by 11%. Online sales also improved by 20%.
 

The company’s net profits ended at 147 million dollars (about 130 million euros), compared to a loss of 19 million dollars (16.84 million euros) a year ago, when Levi’s was hit by a serious blow from the IRS. The gross margin ended at 54.6%.
 

Levi’s intends to take an omnichannel route and made an initial public offering last month to finance it. The brand didn’t sell any shares for 34 years. Now, its value on Wall Street is 6.6 billion dollars (5.85 billion euros) but the favourable quarterly figures immediately boosted the share by about 6.5%.

Own stores in China and Europe

Top executive Chip Bergh has revealed the plan to open another 100 physical stores this year. Sixteen of those are already open. The majority will be in Europe and Asia. China in particular is a top priority for the CEO: today, that market only represents 3% of company turnover, whereas competitors such as Nike generate 20% of their turnover there. 
 

In Europe, Levi’s did grow by more than 20% over the last two years. The label’s own stores have also been groing by double-digit numbers for three years. Near the end of February, Levi’s owned 832 own stores. 115 of those were new since last year, although 41 stores were closed in 2018 as well. Another 60% of the turnover comes from wholesale.

“Important for the future”

The switch to selling more directly to the consumer was a wise one according to analysts. On the other hand, they do warn about the costs. Levi’s has been carrying a debt load of 1.02 billion dollars (900 million euros) for a while. That alone cost the brand 200 million dollars in interest.
 

“In our view, taking control over distribution in this way is a critical component of future success – especially given the issues with third-parties such as department stores,” stated Neil Saunders, managing director at GlobalData Retail. “These more traditional routes to market simply cannot be relied upon to sustain wholesale revenue growth over the medium-to-longer term.”