Levi & Strauss Co.
jeans are iconic. Still, Chief Executive Chip Bergh said this week the company will become less reliant on that item over the next 10 years.
During its quarterly earnings report this week, Bergh discussed the growing sales numbers for Levi items that aren’t jeans. For example, 21% of 2020 sales were shirts, compared with 11% in 2015. And accessories, shoes, and chino pants were 16% of sales in 2020.
“Over the next decade, as we drive outsized growth in tops and these other categories, we expect half our revenues will come from products that are not denim bottoms,” Bergh said on the earnings call, according to a FactSet transcript.
The shift is part of a move to diversify the company’s portfolio, which Bergh said will drive growth and be margin accretive. That diversification is not just in the items it sells, but in geographical markets, with international sales constituting 56% of the 2020 total.
The women’s business has grown from 20% in 2015 to 34% in 2020.
And the company is making a value play, with the rollout of the Red Tab collection at Target Corp.
heading to 500 stores and double-digit growth of the Signature line at Walmart Inc.
Of course, digital has an important role in all of this.
“We are digitally transforming everything we do, enabling us to deliver a superior consumer experience, increase efficiency in our business, drive more profitable growth, and reduce costs,” Bergh said.
Taken together, UBS analysts are upbeat about the company’s prospects moving forward even as it faces challenges from the COVID-19 pandemic.
Levi’s adjusted profit per share in the fourth quarter was down to 20 cents versus 26 cents last year. And revenue fell to $1.39 billion from $1.57 billion year-over-year.
“[T]he company has the brand strength, balance sheet, business characteristics, and strategy to manage through the COVID-19 situation and emerge stronger afterward, in our view,” analysts led by Jay Sole wrote.
“We continue to model Levi’s delivering a double-digit post-pandemic EPS CAGR [compound annual growth rate] and our out-year forecast is unchanged.”
UBS rates Levi stock buy with a $27 price target.
Levi shares have rallied 22.2% over the past three months, and are nearly breakeven over the last year.
The S&P 500 index
has gained 14% for the last 12 months.