Levi Strauss & Co. (LEVI) is showing its strength as the company raised its full-year profit forecast on Wednesday, citing cost savings from both job cuts and less aggressive discounts among its products. This was reflected in its first-quarter earnings results which showed in the apparel company's adjusted gains of $0.26 per share, beating expectations of $0.21 per share.
Levi Strauss CFO Harmit Singh talks with Yahoo Finance Executive Editor Brian Sozzi on the floor of the New York Stock Exchange to break down Levi's performance and trends in the retail market.
Singh explains why, in part, Levi has seen such strength recently: "It started post-COVID with the world becoming a lot more casual, dressing becoming a lot more casual, and denim, I mean, how can you be more casual other than wearing good style denim products? And the other piece is people want to be comfortable. That's where the looser, baggier fit is really taking shape. So, the question is, can you wear more than just denim bottoms? That's where we're introducing denim skirts, we're introducing denim dresses, and that's taking off."
BRIAN SOZZI: Harmit, me, always good to-- always good to see you. And if I picked up on anything-- a lot of activity as you can see down at the New York Stock Exchange, really takes me back to your IPO over what? Over five years ago?
HARMIT SINGH: Exactly five years.
BRIAN SOZZI: Exactly five years. Nonetheless, in your latest earnings report, to me, there was a lot of new trends called out. And I think that's very important for investors to know what these trends are because they will shape your earnings. Maybe you could tell us a little bit about them.
HARMIT SINGH: Sure. You know, so denim is having a moment and the brand's never been stronger. And we, as a leader, are leading those trends. So it's really a more of a head-to-toe look on denim, denim on denim. And as a company, we are evolving into more of a denim lifestyle apparel retailer.
And so what are the trends? Our core's solid, 501 grew 20-odd percent, on top of 30% last year. But what's really happening is there is the loser, baggier fit that's taking shape, right? Our men's and bottoms--
BRIAN SOZZI: Hey, this ain't for me. I want to look slim, Harmit. It's not for me. Maybe it's for you.
HARMIT SINGH: You know, I wore my first 51-- 570 bootcut the other day. And so if I can do it, you can do it.
BRIAN SOZZI: I did that in high school in the '90s but go ahead.
HARMIT SINGH: But the loser, baggier fit is really what's taking off and that's important. Our core is still very solid. The other thing is, we're introducing dresses, we're introducing denim skirts, we're getting into jumpsuits. And that is up triple digit. And that's a larger addressable market. So as we evolve the brand into more of a lifestyle apparel denim brand, OK, our addressable market is increasing.
The other thing that I was-- I'll ask you to go and check out is with the growth in the active apparel market, we've introduced performance tech. So that's available for $69.50. I wear all the six colors. And so it's for you, Brian.
BRIAN SOZZI: Talk to us about what you think is driving this moment for denim. I walk around, I still see people wearing jogging pants and various jogger type of pants. But why do you think people are navigating to what you're selling?
HARMIT SINGH: Yeah. It started post-COVID with the world becoming a lot more casual, dressing becoming a lot more casual. And denim, I mean, how can you be more casual other than wearing good style denim products. And the other piece is people want to be comfortable and that's where the loser, baggier fit is really taking shape.
And so the question is, can you wear more than just Denim bottoms? That's where we're introducing denim skirts, we're introducing denim dresses, and that's taking off. So it's all about being more casual. The workplace is a lot more hybrid than it has been in the past. And that trend we're seeing around the world.
Our view is that the category, OK, which is stabilized in the US after many quarters of being volatile will grow about mid-single digit for years to come. And as the brand leader, as the market leader, we've just-- we talked about growing our share in men's and women's. And so our job is to be responsible and try and grow the business from $6.5 billion to $9 to $10 billion over time.
BRIAN SOZZI: I bet that you are-- you have been up around the clock asking your teams about the sales spike from Beyonce. I mean, tell it to us. I mean give it to us straight. I mean, what type of spike are you seeing? Does a spike even exist?
HARMIT SINGH: So it's happened and it's happened organically. You know, there's no better person who's what we call the center of culture, the cultural czar in somebody like Beyonce. And having called us out, her song's gathering momentum. We have as so far, I think, the last couple of days, recorded 1 and 1/2 billion impressions thanks to her being a wonderful fan of Levi's.
Now, there's a story. In 2019, she got on stage in Coachella with our denim cutout shorts and shorts took off. And so I think we'll see the positive impact on the business. But we are humble and honored that she chose us to-- and to talk about our brand. And so again, I think what's happening is there is also an uplift of the Western dress culture, the Western shirts, the Western dresses. And you know, which better brand to take that forward other than Levi's?
BRIAN SOZZI: Well, you mentioned this happened very organically but as a management team, do you sit around the table and think, let's give Beyonce a call, let's develop our own line of Beyonce jeans?
HARMIT SINGH: You know, we have-- one of the hidden assets is what's something we call house of Strauss. It's in key cities around the world. We have one in LA. That team works organically with a-- with a bunch of celebrities. And that's why you see celebrities-- Bad Bunny was up on stage at the Grammys wearing our product. You've seen that happen organically around the world. And so we have these deep relationships. They come to bear. But we do it in a very authentic way because that's who we are, right, as a company.
BRIAN SOZZI: It's not lost on a lot of folks watching this right now, naturally this is Jobs Day. 303,000 headline jobs created, another strong month for job creation. What does hiring look like for Levi's? Are you able to get the workers is your need in what appears to be a tight labor market when nobody really expected to stay this tight?
HARMIT SINGH: Yeah, no. So unfortunately, we have-- we had to tighten our costs because business was tough about a year ago. We actually just completed a reduction in force. But we are hiring on a targeted basis. As a DDC-first company, we are building 100 stores a year on a system basis. So we are hiring for those stores. And so where we investing is really store associates, stylists, et cetera. And yes, we are able to get them largely because the brand's really trusted, people love the brand, and our business and DDC is really doing well. So to your question, targeted hiring and it's largely happening at the DDC business as that grows.
BRIAN SOZZI: Since we last talked, Harmit, before I let you go, we've seen oil prices really climb here, now breaking through $90 a barrel. What is this doing to shipping rates and how do you think this might impact products that you may ship towards the back half of the year like for back to school?
HARMIT SINGH: Yeah. No, it's a good question. We watch that. Where our costs really get impacted is driven by commodities, largely cotton. In terms of shipping rates, we have long-term contracts so at this moment, we're not seeing any pressure in terms of where oil is. Should it rise further, we'll be able to manage through it because we have other areas of opportunity to try and manage that issue. But right now we're not worried about it.
BRIAN SOZZI: All right, Harmit, always good to see you. I should say about 5 and 1/2 years ago, you had your IPO. Yahoo Finance talked to you then. 5 and 1/2 years later, it's good to see you again. We appreciate you always giving us some time.
HARMIT SINGH: No, thanks, Brian, for having us. We've been with Yahoo Finance every quarter as we report earnings and we appreciate it. I know you're now an executive producer. We appreciate you coming to the floor and having this moment. But five years, a lot has changed but nothing has-- a lot has not changed either.
BRIAN SOZZI: Well, still look great and I'm starting to look old as AF. All right, Madison, back to you over there in our New York City studios. Hope I got enough Beyonce questions in for you.
MADISON MILLS: You did so much more than I could have ever asked for, Brian. Thank you so much, as always, for bringing us such great content. Our executive editor there, Brian Sozzi.
