Levi Strauss tightens budget: Owned by Levi Strauss, Beyond Yoga, Dockers, and Levi’s, the company reported a 7.8 percent decline in revenue to $1.56 billion (€1.44 billion) in Q1 2024, along with losses of approximately $10 million. Levi Strauss’s NYSE share price reached a 12-month high on Thursday, only hours after Michelle Gass—the group’s CEO since January—announced these results.

The global denim giant’s plan to increase efficiency, which included laying off a large portion of the workforce, was launched in January and is reassuring the financial market. Gass appeared to have justified this confidence with the extra facts he offered on Wednesday.

Levi Strauss initially announced plans to cut 15% of its employees, primarily from middle management positions. In an interview with financial analysts, the group’s CFO Harmit Singh confirmed that steps have been taken in this regard, resulting in a 12% reduction in the global workforce of Levi Strauss.

While layoffs are the most striking aspect of Project Fuel, other radical practices are also a part of it. In reality, Levi Strauss has declared the end of the Denizen brand, which is particularly well-known in Asian and other global markets, and has also introduced two other significant policies.
To begin, Levi’s has withdrawn from the shoe market since it is too insignificant and unrelated to the company’s core competencies. Future partnerships are the only way Levi’s will be involved in this market.

The second item on the agenda is the closure of the Plock, Poland, factory, which the company said will help “optimise the supply chain and make it more flexible while reducing costs.” There is a rich history between Levi Strauss and the Plock facility. Established in 1991, it has employed as many as 1,000 people and has the capacity to create around 300,000 units annually. Polish news outlets report that the facility, which employs 650 people at present, will end operations in June and cease accepting orders in November.

All things considered, these alterations should “assist unlock the genuine potential of the Levi’s brand on a global scale,” according to Singh. We expect to save about $100 million in 2024 and even more in 2025 thanks to these strategies.

The company has reported an improvement in its gross margin and is beginning to reap the benefits of its efforts in retail distribution and the supply chain, in addition to those resulting from the reorganization.

“The strategy of promoting our brands, operating as a direct-to-consumer business and diversifying our portfolio is bearing fruit,” Gass added, referring to the company’s excellent performance this quarter. She emphasized the success of Levi Strauss’s direct-to-consumer (DTC) division, which had an 8% increase in revenue during Q1 2023, a 12% increase in online sales, and a 14% increase in sales of womenswear products over the whole direct retail network.

Michelle Gass, the Levi Strauss group’s new CEO – Levi Strauss & co

Levi Strauss is eager to improve its direct-to-consumer performance, mainly because the company is certain that doing so will increase its profit margins. One hundred new Levi’s stores are planned to open by Levi Strauss in 2024. A new Levi’s flagship store will be inaugurated in a fortnight on the Champs-Elysées in Paris.

The Champs-Elysées location will provide French and international Levi’s fans with the finest and most comprehensive representation of our lifestyle denim collection. Our newly built store in Kyoto, Japan’s busiest shopping district provides a unique shopping experience for our consumers. While building a scalable and lucrative store portfolio, these stores—and those to come—demonstrate our dedication to providing world-class shopping experiences in the most popular destinations on Earth,” Gass stated.

Most of these new Levi Strauss stores will be located in Asia, where the company thinks there are a lot of promising potential. Half of Levi’s direct-to-consumer revenue increase this year—estimated at roughly 10%—will come from these channels in addition to e-commerce.

So, improving sales at Levi’s current retail locations is essential if the company is to achieve its direct-to-consumer revenue growth targets. What is Levi’s strategy for accomplishing this?

First, by sticking to what it does best, as Gass puts it. After a few years of wild swings, the American jeans market was rather consistent last year. During this time, Levi’s increased its market share among males by two percentage points and among women by one point. Additionally, we are seeing growth within our target demographic of young adults. Our market share among consumers aged 18–30 increased in the first quarter. “Our ongoing commitment to keeping the brand at the heart of denim culture and the innovation we bring to the category are the main reasons for this growth,” Gass explained. She highlighted the 40% increase in sales of loose-fit items, such baggy jeans, which are popular among younger customers, and said that sales for the 501 model were up 23% over the same period last year.

Achieving a wider selection of non-denim items

Denim remains the signature material for Levi’s – Levi’s

Levi’s is eager to grow its direct-to-consumer (DTC) business mainly because it opens up new revenue streams by selling items other than pants. More than 40% of Levi’s revenue comes from non-denim categories, therefore the company is shifting its marketing efforts to highlight their denim total looks.

We have established ourselves as the go-to experts in denim, and now we’re going to take our jean expertise to the next level. The skirt and dress categories are experiencing growth rates in the triple digits. Gass announced the arrival of new denim tops, blouses, gilets, and more. “We are proceeding with a full overhaul of our tops business, and we are seeing encouraging early results. The tops category is outpacing the rest of the brand in terms of growth, with direct-to-consumer revenue increasing by around 10%,” she said. Additionally, Levi’s has appointed a VP to oversee the design of tops.

Now more than ever, the band is counting on in-store and online direct sales to bring in customers. Consequently, it has a lot of logistical hurdles to jump, like decreasing the number of times essential products go out of stock and increasing the rate at which new products may hit store shelves. As an additional responsibility, the company must assure its multibrand partners. The wholesale division of Levi Strauss still generates the majority of the company’s income, despite an 18% decline in Q1 2024.

“Just because you have a DTC-first mindset doesn’t mean you ignore anything else. According to Gass, the wholesale channel will remain crucial in getting our brand in front of customers in areas where we wouldn’t have the resources to do it ourselves.