Levi Strauss (LEVI, Financial) experienced a significant surge, reaching a new 52-week high following its Q1 (February) earnings release. The denim giant showcased the largest EPS upside in five quarters, despite a 7.8% year-over-year revenue drop to $1.56 billion, aligning with analyst projections. This quarter marked the debut of Michelle Gass as CEO, succeeding Chip Bergh after his 12.5-year tenure. Amid recent struggles, the brand anticipates revitalization under Gass's leadership, with a strategic focus on international expansion, evolving Levi's into a comprehensive denim lifestyle brand, and pivoting towards a direct-to-consumer-first model.
The quarter's revenue decline was notably impacted by a previous $100 million shift due to an ERP implementation in the US and the exit from the Denizen business and Russia. Adjusting for these factors, revenues remained steady. The global direct-to-consumer business continued its robust performance, with e-commerce growing 12% and the women's segment in DTC markets increasing by 14% globally in Q1.
In the US, Levi's largest market, the brand witnessed ongoing progress in its DTC efforts, achieving a 10% increase, and a stabilization in US wholesale, with a slight uptick. Despite a global wholesale revenue dip, the results met expectations, indicating effective business improvement measures.
Levi's core offerings thrived alongside innovative expansions in denim and beyond. Notably, 501 sales in DTC channels soared by 23%, complemented by a significant demand for Loose Fits and new baggy styles for women. The brand also capitalized on the denim market's expansion potential, with triple-digit growth in denim skirts, dresses, and jumpsuits, and a 40% increase in Women's Western tops.
This quarter stands out as one of Levi's best in recent times, signaling a positive investor response to the new CEO's strategic direction. The expansion into new categories and the emphasis on direct-to-consumer sales are pivotal moves. Additionally, the improved outlook on the previously struggling wholesale business has contributed to a renewed optimism in Levi's future prospects, marking a potential turnaround from its mid-2021 to mid-2023 downturn.
