Levi Strauss Thanks in part to higher prices, we had another strong quarter, with direct-to-consumer sales accounting for more than half of our overall revenue. This was a milestone for the company, which had long relied on wholesalers.
The denim maker’s revenue increased 14%, and DTC sales through Levi’s own stores and website increased 16%, bringing total DTC sales to 52% of total revenue.
CEO Michelle Gass said in an interview with CNBC that the company expects DTC revenue to account for more than half of its total sales for the year, even as traditional wholesale channels continue to grow.
This growth is not only due to increased sales volumes. Levi’s is benefiting from higher prices and positive currency headwinds. Finance chief Harmit Singh, who announced his plans to step down on Tuesday, said about half of Levi’s growth was related to recent price increases and the other half to actual unit sales.
Given the strong first quarter, Levi’s raised its guidance. LSEG said it expects full-year adjusted earnings per share to be between $1.42 and $1.48, below its lower-end estimate of $1.47.
LSEG said it expects sales to rise 5.5% to 6.5%, significantly higher than the 5.6% forecast.
Here’s how the apparel maker’s first-quarter results compare to Wall Street’s expectations, based on a survey of analysts by LSEG.
Earnings per share: 42 cents adjusted, 37 cents expected; Revenue: $1.74 billion, $1.65 billion expected.
The company reported net income of $175.8 million, or 45 cents per share, for the three months ended March 1, compared with $135 million, or 34 cents per share, in the year-ago period.
Sales were $1.74 billion, an increase of approximately 14% from $1.53 billion in the same period last year.
While Levi’s DTC-first strategy has increased profits, changing the distribution system has increased costs in the short term, weighing on profits. However, Singh said sales are becoming more profitable as DTC grows in scale.
He also noted that Levi’s guidance could be raised later this year. Currently, 20% tariffs are expected worldwide, but after the Supreme Court struck down so-called reciprocal tariffs earlier this year, President Donald Trump has placed a 10% tariff on U.S. imports for the time being. If the 10% tariff continues, it could boost full-year earnings by $35 million, or 7 cents a share. Singh said the company could be reimbursed up to $80 million after the Supreme Court struck down President Trump’s previous global tariff policy.
While this could boost profits, Levi’s could face a decline in sales in the coming months as consumers digest higher gas prices and consider cutting back on purchases of essentials such as new clothing. Gass told CNBC that so far there has been no decline in spending and that the business is fragmented to reach a broader consumer base.
For example, Levi’s value brand Signature saw sales increase 16% in the quarter, mid-market Red Cap grew 9% and premium line Blue Tab also grew, Gass said.
“Over the past few years, we’ve been talking about making some big, bold moves, including selling Dockers and other brands and businesses, and now we’re focused on segmenting under the Levi’s umbrella,” Gass said. “We feel like we’re able to serve consumers across all demographic and psychographic cohorts. And another factor is that when you think about our business globally, 60% of our business is outside of the United States, which gives us very good diversification. So we’re monitoring it closely, but overall we feel good about our consumers.”
