With 2023 roughly in the rearview mirror, Levi Strauss & Co. is trying to… This year she addressed her problems with new pants.
This includes pants with lightweight denim; Women's pants that can be worn as high or low rise; And even the non-jeans pants that were management, during Levi's Levi,
Thursday's earnings call, which are referred to as “tech pants” for men with “moisture control and 360-degree mobility.” The company also plans to expand its offering of Performance Cool pants that aim to keep wearers cool and dry on hot days.
But as those products roll out, the retailers that account for most of Levi's sales remain cautious about stocking their shelves with new clothing — even though Levi's executives noted a slight improvement in demand from apparel stores during the fourth quarter and the holiday period. As the denim leader cuts costs, brings on new leadership, and tries to become a bigger player in e-commerce, Wall Street is now looking for signs of a payoff.
“Ultimately, the market will look for evidence that new strategies can drive accelerated growth,” Jim Duffy, an analyst at Stifel, said in a research note on Thursday.
“We continue to believe in the vitality of the brand and opportunities for expansion. As product reflecting the new trend hits the market in 2024, the proof will be in the consumer response.
In an interview with MarketWatch on Friday, Duffy said he was optimistic about Levi's position as an established brand and increasing demand for dresses, skirts and other women's apparel. But he suggested that the more products a company launches, the more it will invest to make them work — and the more management it will need if sales falter.
“The risk, as I see it, is that more categories means more SKUs, more fashion products rather than basic core styles, and more investment and inventory which, if not translated to market, can lead to higher markdowns,” he said in a reference. To stock keeping units through which retailers keep track of inventory.
Levi's said Thursday it will lay off between 10% and 15% of its global employees in the first half of this year, a move aimed at saving $100 million in costs over that period. The layoffs are part of a two-year plan, called Project FUEL, aimed at saving money and boosting the part of Levi's business that sells directly to consumers through its e-commerce network and brick-and-mortar stores, rather than through third-party retail. Operations.
The layoff announcement came days before CEO Chip Berg departed from this position, with Michelle Gass assuming his position on January 29. While the company is trying to be bigger than men's jeans, Gus said in Levi's earnings statement Thursday that it saw an opportunity to grow internationally, make Levi's online and brick-and-mortar sales a bigger priority, and turn the brand into a “bigger style business.” Denim clothing life.
Shares of Levi's fell in after-hours trading Thursday, after the company's full-year earnings forecast fell short of expectations. The stock rebounded 1.3% on Friday but is still down 10.3% over the past 12 months.
However, Levi's direct-to-consumer sales jumped 11% during the fourth quarter, and accounted for 42% of overall sales. Duffy said the company has delved deeper into the direct selling business because it gives executives greater visibility into what consumers want, as well as more control over how it markets and sells its clothing. Cutting out other retailers also expands sales margins, he noted.
Levi's operating margins were higher in the fourth quarter. It also announced a dividend of 12 cents per share, payable in cash on February 23.
But sales in Levi's wholesale segment — sales it gets from retailers who buy Levi's product, then sell it to consumers — fell 2%. The company said that better results in the United States and Asia were offset by a decline in Europe.
Retailers have spent the past two years trying to remove unwanted clothing from their warehouses, cutting prices in the process, after rising inflation restricted many shoppers' appetite for basics.
As Gass prepares to take the reins, she has sought to put a positive spin on the retail chain's sentiment. “So, as a company, overall, we're coming out of the year strong,” Gass said on the earnings call. “Overall in the United States, we are encouraged. But in terms of this channel, we have not declared victory yet. There was a lot of volatility last year, some within our control, some outside of it. So we are taking a cautious approach as we look forward.
