Dive Brief:
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Iconic American jeans maker Levi Strauss & Co. on Tuesday reported third quarter net income rose 69% thanks in part to cost-cutting efforts in addition to rising revenues.
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Q3 net revenues grew 4% percent on a reported basis, and 5% excluding $11 million in unfavorable currency translation effects, Levi's said. Revenue growth was due largely to increased direct-to-consumer sales, which grew 14% in the quarter for stores and e-commerce.
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Expenses for the quarter were $449 million, compared to $455 million in the year ago period. Excluding currency fluctuations, costs were lower thanks to reductions in advertising costs and restructuring-related charges, as well as a benefit of approximately $7 million associated with the resolution of a vendor dispute.
Dive Insight:
Levi’s has struggled in recent years, first as high-end jeans usurped its iconic place as the go-to denim maker and then as athleisure took over as the favored way to dress around town. Consumer preferences for comfort and design, which has women especially wearing yoga pants beyond their exercise classes, prompted the old-school retailer to announce last month that it’s adding stretch to its trademark 501 jeans.
It’s a risky move, considering that such a significant change to a best-selling item could dilute its reputation with its fans, which the company notes include “labor workers” as well as "rock stars." Levi’s pretty much invented jeans as we know them — using rivets to add durability to a fabric that fades and softens in a way that has been perennially pleasing to its customers. The design of 501s in particular, named after their lot number assigned in 1890, would be recognizable to the Gold Rush-era workers who first wore them. But 21st century customers now have other choices in durable fabric, and fewer are riding horses or doing hard labor.
“Putting stretch into the 501 was not taken lightly, and we’ve done it with absolute care and respect,” Jonathan Cheung, Levi’s Senior Vice President of Global Design, said in a September blog post. “We were very conscious that the denim for the 501 stretch had to be special. To do that, we took over a year to develop the fabric to make sure that the denim looked like a 501.”
Levi's third quarter results indicate something of a comeback, and any success of its stretchier jeans could certainly add to that. The company is capitalizing on its name to open more of its own stores and boost its e-commerce sales, with 42 more company-operated stores at the end of the third quarter of 2016 than at the end of the same period last year.
“We are pleased with the third quarter results with broad-based revenue growth across all three regions despite the continued challenging environment, particularly in the U.S.,” President and CEO Chip Bergh said in a statement. “Our direct-to-consumer business continues to drive our results with both brick and mortar and e-commerce growing double digits.”