Direct-to-consumer growth powers strong sales boost for Levi Strauss

Clothing company Levi Strauss & Co saw higher direct-to-consumer (DTC) net revenue during the third quarter of FY23, on the back of strong performance in company-operated mainline and outlet stores and e-commerce.

DTC net revenue, which comprised 40 per cent of total net revenues, increased 13 per cent year over year on a constant currency basis. E-commerce revenue rose 18 per cent.

“In the third quarter, we delivered double-digit growth in our direct-to-consumer business, driven by strong comp-store gains, which helped offset continued softness in the wholesale channel, primarily in the US,” said Chip Bergh, president and CEO at Levi Strauss.

“We are focused on the levers within our control and the actions we took in the third quarter are beginning to drive improvements in US wholesale trends.”

The company’s wholesale net revenue plunged 10 per cent, attributed to its Asian and Latin American markets, offset by declines in North America and Europe.

Asia outperforms Europe, the Americas

Net revenue in the Americas and Europe slid 7 per cent and 6 per cent, respectively. Net revenue from Asia increased 18 per cent due to growth across all markets in the region including strong growth in China.

The company’s revenue from its other brands jumped 9 per cent, with Dockers rising 5 per cent and Beyond Yoga surging 25 per cent.

Overall net revenue fell 2 per cent to $1.5 billion while net income plummeted 95 per cent to $10 million. Gross margin went down to 55.6 per cent.

Meanwhile, the company forecasts its FY23 revenue to be flat to up 1 per cent.

“While we saw sequential improvement in the business across the company as we moved through Q3 with both July and August up versus prior year, given the ongoing uncertainty in the macro environment, we are taking a cautious approach to our outlook for the fourth quarter,” said Harmit Singh, CFO and growth officer at Levi Strauss.

“As we accelerate our transition to a DTC-led company, we have commenced an initiative to review our operating model and cost structure that should drive agility and material cost savings beginning in FY24.”

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