Levi strauss rides high as direct-to-consumer sales surge 16%

Denim giant Levi Strauss & Co. saw another quarter of strong sales, with revenue growing 14% to $1.74 billion. A major driver of this growth was a 16% surge in direct-to-consumer (DTC) sales, which now make up more than half of Levi's overall revenue.

Levi's dtc strategy pays off

Levi's CEO Michelle Gass expects DTC revenue to remain above 50% for the full year, even as its traditional wholesale channel continues to grow. The success of this DTC-first approach has been driven in part by higher prices and positive foreign exchange headwinds. According to finance chief Harmit Singh, about half of Levi's growth can be attributed to recent price increases, while the other half is due to actual unit sales.

Levi's raised its guidance for the full year, now expecting adjusted earnings per share to be between $1.42 and $1.48, shy of Wall Street expectations. Sales are expected to rise between 5.5% and 6.5%, largely ahead of estimates.

Segmentation strategy yields results

Gass highlighted the company's segmentation strategy, which focuses on serving consumers across a wide demographic and psychographic spectrum. Levi now has a strong value brand in Signature, with sales rising 16% in the quarter, as well as a growing middle market with its Red Cap line up 9%. Even its premium Blue Tab line is performing well.

Geographically, 60% of Levi's Business is now outside the U.S., providing diversification. While the company is watching for potential consumer pullback due to higher gas prices, Gass said she has not yet seen a decline in spending. Levi's focus remains on its DTC strategy, with Singh noting that sales are becoming more profitable as the channel scales up.