Western Trend Drives Surge in Levi’s Denim Dress and Skirt Sales

Beyoncé Sparks Denim Craze: Levi Strauss Sees Surge in Sales

In a lyric from her latest album, Beyoncé sings, “denim on denim, on denim, on denim.” Levi Strauss shoppers have taken that advice to heart, much to the delight of Levi Strauss executives.

Western Wear Boom

Western wear is booming as consumers embrace head-to-toe denim looks, the iconic 171-year-old clothing maker announced on Wednesday. This resurgence in Western-inspired fashion is not only driving a renewed interest in classic blue jeans but also significantly boosting sales in denim niches—such as shirts, skirts, and dresses—that extend beyond Levi’s traditional offerings. The trend towards full denim outfits is becoming a cultural phenomenon, with more and more people opting for stylish and cohesive denim ensembles. This shift is helping Levi Strauss diversify its product range and capture a broader market share.

Broader Product Range: The surge in demand for denim skirts, dresses, and shirts indicates a significant diversification from Levi’s traditional blue jeans.
Cultural Phenomenon: The trend towards full denim outfits is becoming widely popular, driving a renewed interest in cohesive denim ensembles.
Market Share: By expanding its product offerings, Levi Strauss is capturing a broader market share and appealing to a wider range of consumers.

Michelle Gass, CEO of Levi Strauss, emphasized the impact of this trend during the company’s latest earnings report for the quarter ended in May. “The growing popularity of Western wear is at an all-time high,” she stated, highlighting the cultural shift that is propelling Levi’s to new heights. This surge in demand for Western wear is not merely a fleeting trend but a significant movement that is reshaping fashion preferences.

Increased Sales: Levi’s has seen a marked increase in sales of denim skirts, dresses, and shirts, indicating a growing consumer interest in diverse denim pieces.
Brand Heritage: By tapping into the Western wear trend, Levi’s is reinforcing its brand’s heritage while meeting contemporary consumer desires.
Innovation: The company is innovating within the fashion industry to adapt to and capitalize on this cultural shift.

By embracing this trend, Levi’s is not only solidifying its position as a leader in denim fashion but also ensuring it remains relevant in a rapidly changing market.

Cultural Influence and Sales Impact

A Western renaissance has been gaining momentum over the past several months, sending fashion-forward shoppers searching for items like jeans, boots, and cowboy hats. Levi’s saw a significant boost when its jean brand was referenced in Beyoncé’s song “Levi’s Jeans,” released earlier this year.

Influences contributing to the trend:
- Beyoncé’s chart-topping “Cowboy Carter” album.
- A fashion line unveiled by Louis Vuitton earlier this year.
- Taylor Swift’s ongoing Eras Tour.

Michelle Gass, who took over as Levi Strauss CEO earlier this year after previously serving as CEO at Kohl’s, emphasized that denim is currently having a moment in the popular imagination, with Western wear trending more broadly throughout culture.

Explosive Growth in Denim Categories

Specific data shared during the company’s earnings call on Wednesday highlighted how Levi Strauss is capitalizing on the demand for denim beyond its popular “501” jeans.

Sales growth:
- Sales of denim skirts, jumpsuits, and dresses all more than doubled in the latest quarter.
- Western shirt sales have seen a significant uptick, particularly among women.

Levi’s is finding success with a new strategy of dressing customers in denim from head-to-toe. “Our new focus is, yes, continuing to own jeans, but taking that denim top to bottom,” Gass said on CNBC’s “Mad Money” late Wednesday.

Category expansion:
- Denim skirts and dresses, historically smaller categories for the company, are now “exploding” in popularity.

Financial Performance and Market Reaction

Despite the well-documented denim craze, Wall Street was not entirely impressed. Levi Strauss shares fell more than 15% on Thursday following the release of its latest numbers, marking its second-worst day since going public in early 2019.

Revenue performance:
- Levi Strauss posted $1.44 billion in revenue in the fiscal second quarter, slightly missing the $1.45 billion consensus forecast of analysts polled by LSEG.
- The sales miss was attributed to unfavorable foreign exchange rates and weakness in the Dockers brand, according to the company’s finance chief.
Earnings performance:
- Levi Strauss earned 16 cents per share, excluding items, surpassing the 11-cent average estimate by analysts.

Despite Thursday’s drop, the stock is still up more than 18% for the year, driven by the buzz around the cotton-based fabric and the resurgence of Western clothing.

Stock performance comparison:
- Shares of Kontoor Brands, the parent company of denim brands Wrangler and Lee, have risen 5% year to date.

Analyst Perspectives

Wells Fargo analyst Ike Boruchow noted that for “one of the most crowded longs in the space today,” Levi’s second-quarter release “was simply not good enough.” In other words, the company missed what was an admittedly high bar.

Concerns:
- Performance of the wholesale business.
- Potential for European sales to struggle in the second half of the year.

Citigroup analyst Paul Lejuez considered Levi’s most recent quarter to be good but expressed concerns over these areas. However, he pointed to several tailwinds as reasons for optimism about the stock:

Tailwinds:
- New styles and fits, common for a clothing maker.
- A unique factor: Beyoncé.

Conclusion

By capitalizing on the current Western wear trend and leveraging cultural influences, Levi Strauss is positioning itself to continue benefiting from the denim boom, even as it navigates challenges in the broader market. The Western renaissance has been fueled by major cultural moments, such as Beyoncé’s “Cowboy Carter” album and Taylor Swift’s Eras Tour, which have popularized head-to-toe denim looks. Levi Strauss has adeptly seized this opportunity by expanding its product lines beyond its traditional blue jeans to include a broader range of denim apparel such as skirts, dresses, and Western shirts. This strategic diversification has not only met the growing consumer demand but has also allowed Levi’s to tap into new market segments and boost its overall sales performance.

The company’s innovative strategy to expand its denim offerings from head-to-toe and the influential endorsement from Beyoncé are expected to keep Levi Strauss at the forefront of the fashion industry, driving future growth and maintaining its iconic status. With a renewed focus on comprehensive denim styles and significant cultural endorsements, Levi’s is poised to strengthen its brand presence and sustain its market leadership. Despite facing challenges such as unfavorable foreign exchange rates and varying performance across different regions, the robust growth in denim categories and the heightened consumer interest in Western wear are key drivers for Levi’s future success. As Levi Strauss continues to navigate the evolving fashion landscape, its ability to adapt to trends and leverage high-profile endorsements will be crucial in maintaining its competitive edge and achieving long-term growth.