Dive Brief:
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Levi Strauss & Co. beat its own expectations in Q2 on the top and bottom lines. Net revenues rose 8% year on year to $1.6 billion, while net income rose by nearly a third to over $87 million.
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Direct-to-consumer sales grew 11% in the period, with comps up 6%, and accounted for 51% of total revenues, the company reported Wednesday. Wholesale revenue rose 5%.
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The company is building “slightly bigger” stores for its growing Beyond Yoga brand, which now runs fewer than 20 locations, CEO Michelle Gass said on a call with analysts. Net revenue there in Q2 rose 16% to $43 million.
Dive Insight:
As she reported another strong set of results for the denim maker, Gass highlighted the “enduring power of our iconic brand.”
That power was evident in recent weeks in a viral marketing stunt accomplished in the guise of following FIFA’s sponsorship rules, which prohibit nonsponsor ads at stadiums hosting World Cup games. Levi’s Stadium in Northern California was temporarily rebranded “San Francisco Bay Area Stadium” for the games, as a result. It’s difficult to obscure what UBS analysts have found to be the second strongest U.S. softlines brand after Nike.
Levi’s also complied with FIFA’s rules by wrapping the familiar batwing logo that is part of the stadium’s signage— but so tightly that it remained recognizable. Gass said the brand similarly covered its logo on social media and at flagships in major world cities, a stunt that BNP Paribas Equity Research senior analyst Laurent Vasilescu called a “red-hot media impression.”
The effort, which now also includes T-shirts, is Levi’s most viewed social media campaign, with a billion press impressions as of Wednesday, Gass said.
“Levi's seized the moment and flipped the script on this restriction to drive brand awareness,” Vasilescu said. “By covering up the store logos around the world, the marketing campaign went viral and drove a billion media impressions which may likely be a positive for 3Q results, which coincides with the end of the World Cup restriction.”
In Q2, though, Levi’s strength wasn’t just about its brand muscle. Gass also credited its evolution “into a DTC-first lifestyle company,” saying that is “driving more consistent and faster growth, expanding our addressable market and improving our profitability.”
The story, at least for now, is centered at home. Net revenues in the Americas rose 9%, with a 5% increase in the U.S., and executives said there was momentum in both DTC and wholesale.
“The biggest upside driver to 2Q” came from North America, Wells Fargo analysts led by Ike Boruchow said in a Wednesday research note.
Another growth story for Levi’s resides with its Beyond Yoga activewear brand, which saw a high double-digit increase in the period. In addition to extending its brick-and-mortar selling space, the company sees opportunity to expand its men’s assortment, Gass said.
“Men's is an untapped opportunity, and as we've been bringing the men's category forward, that consumer's responding,” she said on a call with analysts. “So there's a lot that we're excited about in Beyond Yoga. You know, it's still early innings for this brand, but we see a lot of green shoots on the business.”
