Levi’s: dark clouds on the horizon despite growth

Levi Strauss saw its first quarter on the stock market end on a negative note: there was less profit than envisioned, to the investors’ disappointment. Still, sales of the jeans brand went up in every market.

Growth in all regions

The jeans brand generated a corrected profit of 28.2 million dollars (25 million euros) in the past quarter: an enormous drop of 63 % that may be (partially) caused by the costs of the initial public offering (29 million dollars). The company has been quoted on Wall Street since March. Turnover did go up by 5 %, which translates to a total of 1.3 billion dollars (1.1 billion euros).

Not only does Levi’s score better than expected, but there was also an increase on all markets. In the women’s segment, turnover even grew by 16 %; tops sold 14 % more. In Europe, sales went up by 9 %, in the United States by 3 % and in Asia by 6 %. China experienced a disappointing 3 % sales growth, which leaves a lot of room for improvement in the eyes of CEO Chip Bergh. Levi’s sees many opportunities that so far remain unused.

Second half of the year will be weaker

Bergh is rather pessimistic about the second half of the year: the forecast “does suggest that the second half is going to be softer than the first half”, he commented to Reuters. The CEO points to the fact that American sales event Black Friday will occur right after the end of the current financial year this time.

On a more structural level, Levi Strauss points out the toughness of the wholesale business: in the United States, Levi’s wholesale branch went down 2 % and Bergh is expecting store closings and bankruptcies among his clients in the second half as well. Investors have made a 6 % downward adjustment to the share in response. A third of the turnover at Levi’s still comes from wholesale, but the brand is hoping to change that: in the second quarter, 78 new stores were opened and retail turnover grew by 9 %.