A Levi's store at the Orlando Vineland Premium Outlets in Florida.
Jeff Greenberg | Universal Images Group |
In a lyric on her latest album, Beyoncé sings “Denim on denim, on denim, on denim.”
Levi Strauss Shoppers are taking this advice to heart. Levi Strauss executives are thrilled.
Western wear is booming as consumers opt for complete denim looks, the iconic 171-year-old apparel maker said Wednesday. As the style becomes more culturally popular, its popularity is revitalizing denim niches — such as shirts, skirts and dresses — that are outside Levi's widely known blue-jean offering.
“The growing popularity of Western wear has reached an all-time high,” CEO Michelle Gass told analysts Wednesday evening after the California retailer released its latest earnings report for the quarter ended May.
A Western renaissance has gained momentum in recent months, sending fashion-conscious shoppers seeking out pieces like jeans, boots and cowboy hats. Levi's scored a huge hit when the denim brand was featured in Beyoncé's song “Levii's Jeans,” which was released earlier this year.
In addition to Beyoncé's chart-topping “Cowboy Carter” album, the increasing ubiquity of the Western style is also linked to a fashion line created by Louis Vuitton earlier this year and Taylor Swift's ongoing Eras Tour.
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Gass, who took over as CEO of Levi Strauss earlier this year after previously serving as CEO of Kohl'shas touted the fact that denim is currently enjoying a major impact on the public consciousness and that western wear is becoming an increasingly popular trend throughout the culture.
More specific data, released Wednesday at the company's earnings call, showed how Levi Strauss is capitalizing on demand for denim beyond its popular “501” jeans. Sales of denim skirts, overalls and dresses at least doubled last quarter, Gass said. Sales of western shirts also rose significantly, she said, especially among women.
Levi is successful with a strategy that the 55-year-old CEO described as a new strategy: dressing customers from head to toe in jeans.
“Our new focus is to continue to produce denim, but to market it from the ground up,” Gass said late Wednesday on CNBC's “Mad Money.” She noted that the denim skirt and dress categories historically haven't been very big for the company, but now “they're exploding,” she said.
Denim craze sets the bar high on Wall Street
Of course, the well-documented jeans trend alone isn't necessarily impressing Wall Street. Levi Strauss shares plunged more than 15 percent on Thursday after the company released its latest figures, the second-worst day since its IPO in early 2019.
Levi Strauss reported second-quarter sales of $1.44 billion, narrowly missing the $1.45 billion forecast by analysts surveyed by LSEG despite the denim boom. The company's chief financial officer told CNBC that the decline in sales was due to unfavorable exchange rates and weakness in the Dockers brand.
Levi Strauss, on the other hand, earned 16 cents per share excluding special items, above the average analyst estimate of 11 cents.
Shares have risen over the past year on the back of enthusiasm for cotton fabric and the revival of Western clothing. After Thursday's drop, the stock is still up more than 18% year-on-year. By comparison, shares of Kontoor brandsthe parent company of jeans brands Wrangler and Lee, is up 5% since the beginning of the year.
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Levi Strauss, year to date
Wells Fargo analyst Ike Boruchow said that for “one of the most competitive long positions in the space today,” Levi's second-quarter earnings “just wasn't good enough.” In other words, the company failed to meet an admittedly high bar, he said.
Citigroup analyst Paul Lejuez thought Levi's last quarter was good, but cited the development of the wholesale business and the possibility that sales in Europe could also weaken in the second half of the year as reasons for concern.
Lejuez pointed to several factors that provide cause for optimism about the stock. Two of his reasons for excitement – new cuts and fits – are common for a clothing manufacturer.
Lejuez's last girlfriend was more unique: Beyoncé.
— CNBC's Gabrielle Fonrouge and Julie Coleman contributed to this report