Levi revenue beats forecasts as demand holds up

Levi Strauss & Co has reported quarterly revenue that exceeded expectations, suggesting fears of a denim slowdown were overblown amid strong momentum in the direct-to-consumer business and improving trends in Europe.

Revenue in the fiscal fourth quarter ended Nov 27 was Us$1.59bil (Rm6.8bil), compared with the Us$1.57bil (Rm6.7bil) average estimate of analysts surveyed by Bloomberg.

Earnings of 34 US cents (RM1.45) a share, excluding some items, also exceeded analyst estimates.

Total inventories, meanwhile, were up 58% in the fourth quarter, compared with 43% when the company last reported results.

Levi said it expects more normal inventory levels by the end of the second quarter of this year, and noted that two-thirds of inventory is in core products.

The shares rose 2.8% in late trading in New York. The stock has risen 6.4% since the start of the year after a sharp overall decline in 2022.

Ahead of the report, a handful of analysts downgraded their ratings of the jeans maker. They cited a sinking demand for denim, particularly among younger shoppers, in favour of styles like cargo and twill pants.

The better-than-forecast results suggest that phenomenon might be less serious than expected.

“The US denim category has been soft for the last six months or so, but it’s basically a correction from the double-digit growth from the first six months of the 2022 calendar year,” Levi chief executive officer Chip Bergh said in an interview.

“And we are more than just denim – 40% of our revenue comes from non-denim products. The diversification of our business helps us weather any bumps in denim.” Direct-toconsumer revenue fell 2% in the fourth quarter, while wholesale, fell 8%.