Levi’s Closing in on 50-50 Split as Direct-to-Consumer Sales Accelerate

If the current uptrend continues, by this time next year, every time Levi’s sells a pair of jeans at one of the 3,200 stores or shop-in-shop locations in its massive 110-country global retail network, it will also sell another pair online. 

While this 1:1 physical-to-digital ratio is still a way off, the San Francisco-based denim giant is getting closer and closer, as redesigned stores, improved websites and apps and changing consumer habits combine to drive growth in digital the likes of which Levi Strauss & Co has never seen.

“Our relentless focus on our strategic priority of being brand-led, DTC-first and diversifying the portfolio has delivered strong results, even with continued macro-economic uncertainty and persistent inflationary pressures,” Levi’s CEO Chip Bergh told investors on the company’s second-quarter earnings call Thursday (July 7) evening.  

The comments come in the wake of a quarter that saw a 15% increase in total sales, being eclipsed by a 22% advance in its direct-to-consumer (D2C) sales, which the apparel giant said finished the quarter at 37% of total revenue.

Building on the Momentum

To boost that momentum and embrace a changing marketplace, the Levi’s chief said the company plans to increase its flagship store count after successful remodeling in key cities like San Francisco, New York, Paris and London. At the same time, the denim leader said it is looking to grow its portfolio of company-operated D2C stores to more than 1,500 locations, while also tripling its eCommerce sales at Levis.com over the next 5 years.

To guide the iconic 170-year-old brand’s digital shift, Bergh said he was establishing a new, direct-report, chief digital officer role that will bundle the brand’s growing basket of data, AI, engineering and digital product management efforts under the oversight of a single leader.

“We see tremendous potential in e-commerce and with the leadership to drive its success, we will move more quickly to realize it,” Bergh said of the effort to spearhead efforts for both eCommerce and digital go-to-market initiatives.

In addition, the digitally dominant Levi’s said it will also continue to deepen the data gathering capabilities needed to support the growth of its direct personalized relationships with consumers through its app and loyalty programs.

Beyond Blue

While Levi’s 501 jeans are still the dominant source revenue and profits at the firm, rising 40% in Q2, the company is also actively looking to grow and diversify into other avenues, including its Docker’s unit, as well as its newly acquired Beyond Yoga brand.

“The opportunities here are tremendous, with untapped potential across women’s, tops, international and our Other Brands,” Bergh said of the company’s other key focus area. “One of the biggest long-term opportunities we have ahead of us is to extend into true head-to-toe expressions of our brands and we’re making solid progress,” such as a 23% increase in the sale of tops or a 10-fold increase in polo shirts.

In addition, Levi’s flagged the sell-out growth it saw in dresses, pop colors and prints and the Mommy & Me Collection at Beyond Yoga, which Bergh said is set to open its first permanent physical location in the fourth quarter of this year.

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