Levi Strauss Becomes ‘D2C-First Company’ as That Business Reaches 52% of Revenue

Levi Strauss & Co. said it saw better-than-expected financial results in the first quarter as it continued to increase its focus on the direct-to-consumer (D2C) business.

At the end of the quarter, the D2C business accounted for 52% of the apparel company’s total global net revenues, according to a Monday (April 7) earnings release.

That figure was up 2 percentage points from a year earlier and, as it accounted for more than half of revenues, marked a milestone in the company’s transformation into “a D2C-first company,” Michelle Gass, president and CEO of Levi Strauss, said Monday during a quarterly earnings call.

“Direct-to-consumer continues to be the primary growth driver, up 12%, fueled by positive comp growth, successful new openings and strong eCom performance,” Gass said.

The shift to D2C will result in “more productive and profitable doors,” Gass said, adding that the company expects to build several hundred more stores in the future.

Levi Strauss aims to have D2C account for 55% of its business over the longer term, even as it expands its wholesale business as well, she said.

The wholesale business was up 5% during the quarter, driven by door expansion, more space at existing stores and a wider lifestyle assortment.

“Consistent with our strategy to diversify our channels of business, U.S. department stores now represent just 7%, which is less than half of what it was 10 years ago,” Gass said.

In another change, Levi Strauss announced in the earnings release that it reclassified its Dockers business as “discontinued operations” in the first quarter. The company disclosed during the fourth quarter that it plans to sell the Dockers business, and it said in the Monday earnings release that it aims to complete a sale during the current fiscal year.

Asked about the impact of tariffs, Gass said during the call that Levi Strauss is well positioned to navigate this challenge because almost 60% of its revenue is generated outside the U.S. and it has an “agile global supply chain” and deep vendor relationships.

Harmit Singh, chief financial and growth officer at Levi Strauss, said during the call that the company has already imported to the U.S. most of the product it needs for the spring and early summer.

Singh added that in terms of share of product imported into the U.S., China accounts for 1%; Mexico, 5%; and Vietnam, mid- to high-single digits.

Gass said during the call: “I’d say our supply chain is more agile today than it ever has been. We make pivots all the time. We will continue to do so as we look to address the issues both in the short, medium and long term.”