Levi’s on Tuesday reported that third quarter net revenues rose 10% (11% currency neutral) to $1.4 billion as direct-to-consumer revenues rose 14% (15% currency neutral), thanks to its store expansion (65 more company-operated stores compared to a year ago) and e-commerce growth. Net income rose 45% to $130 million.
Gross margin in the quarter expanded to 53.2% of net revenue compared to 51.8% a year ago, reflecting margin benefit from direct-to-consumer growth, according to a company press release. Earnings before interest and taxes grew 10% to $162 million, reflecting revenue growth and higher gross margins, partially offset by higher selling, general and administrative expenses, which rose to $583 million from $510 million in the year-ago quarter.
Wholesale reported revenues rose 8%. The company saw growth at all brands and regions. Net revenues in the Americas rose 7% (9% currency neutral) to $793 million, and in Europe rose 17% to $406 million.
Levi’s is maintaining its momentum, thanks in part to its move to sell more directly to customers. The company’s direct-to-consumer rise represents its 11th straight quarter of double-digit direct growth, CEO Chip Bergh said in a conference call.
The brand’s performance in the quarter reflects the enduring nature of the denim label’s iconic status, but is also due to the company’s merchandise diversification. “Globally we’re selling a T-shirt every second,” Bergh said. "We're playing the portfolio well across the customer base." Its Dockers brand is getting out of the doldrums, with 2% growth this quarter, "the first time in a while that we've delivered growth" compared to last year, he said, noting that the company sees the light at the end of the tunnel for that label.
Its women's business saw robust growth, rising 26% in the period, the 13th straight quarter of growth, with the last seven hosting double-digit increases, according to Bergh. Even so, executives see that business as under-penetrated and therefore replete with potential for more, he said.
New brick-and-mortar and marketing initiatives are also paying off, he said. The company’s Los Angeles custom design store has garnered attention and traffic, and its second iteration of the Levi’s-Air Jordan shoe sold out in minutes online and in stores, he said. He also said that the company is optimistic that its more recent ad campaigns, one to get out the vote and another with pop star Justin Timberlake, will meet its high expectations and “make an impact and keep the brand in the center of culture.”