Nothing wrong with rocking a bit of double denim, right? Well, others may agree especially as Levis’s (LEVI , $16.41) earnings show that denim is definitely back. Driven by growth across all segments, Levi Strauss‘s second-quarter net revenues rose 15% to $1.5 billion. Overall both its quarterly revenue and earnings came in above Wall Street expectations, as the clothing company benefitted from Americans opting for more relaxed dress codes. Its shares were up about 4% at $17.08 in after-hours trading.
The numbers show net revenue growth of 11% to 13% compared to 2021, reaching between $6.4 billion and $6.5 billion. Adjusted diluted earnings per share (EPS) are expected to come in at $1.50 to $1.56. Digital revenue rose 3% globally and accounted for 20% of sales in the quarter, with D2C and wholesale sales fuelling the strong revenue growth in the quarter.
“Jeans are now much more acceptable in the office,” explained CEO Chip Bergh in an interview. “there’s some evidence that the more value-conscious consumer — the lower-income consumer — is starting to feel the squeeze and is starting to make some choices,” Bergh stated in regards mid-single-digit declines from a year ago at its two value denim brands which sell at big box stores such as Target and Walmart.
Why it matters
The denim behemoth has been experiencing robust demand for its products due to consumers wanting to refresh their wardrobes. Many people have been venturing out more often than they did during the height of the pandemic. This was evident in its numbers from last quarter, where once again, the company beat Wall Street's revenue and earnings expectations.
However, no brand seems to be able to escape the impacts of inflation. And we have already seen CEO Chip Bergh make note that the value-conscious consumer will be tightening their belt, and with a recession looming could see spending on discretionary products, which include apparel and accessories, become a distant afterthought.
