<\/p>\n
A fortnight ago, in\u00a0Levi\u2019s is not the next Nike,\u00a0I touched on Nike\u2019s steady collapse from fatal decisions made in building its direct-to-consumer (DTC) business.<\/p>\n
I will now focus on how Levi Strauss & Co differs.<\/p>\n
As evidence of Levi\u2019s success, in April the group published a strikingly good quarterly report and even upgraded its own guidance:<\/p>\n
Net revenues grew 14% year on year and organic revenue was up 9% year on year,\u00a0with management noting volumes growth and price growth across the board (a really health sign!);
\nDiluted earnings per share (EPS) and adjusted EPS followed to grow 28%\u00a0and 11% year on year respectively; and
\nRevenue growth guidance was effective hiked by 0.5% and EPS guidance effectively hiked by a further 2% year on year .<\/p>\n
Levi\u2019s revenue and EPS (12-month rolling to adjust for seasonality inherent in clothing) <\/p>\n
Source: Koyfin<\/p>\n
While Covid-induced volatility took a while to normalise, tracking Levi\u2019s 12-month rolling sales makes it clear that the group is steadily growing (see chart above).<\/p>\n
From tracking just before Covid, the group has ground out a revenue\u00a0compound annual growth rate (CAGR) of 1.8% year on year and an EPS CAGR of 5% year on year (the latter driven by good operating leverage).<\/p>\n
Levi\u2019s DTC sales have grown from 42% of group\u00a0revenues in Q1\/2020 (just before Covid broke out) to 52% of group revenue in Q1\/2026. In this latest quarter, DTC grew 16% year on year.<\/p>\n
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How is this happening?<\/p>\n
But following on from my prior article chronicling Nike\u2019s DTC-induced collapse, how is Levi\u2019s managing to grow DTC while maintaining its other sales?<\/p>\n
And how is it doing so in the hyper-competitive denim\/jeans category?<\/p>\n
Firstly, there are the subtleties of Levi\u2019s product expansion (including expanding its portfolio from bottoms to now include tops) versus Nike\u2019s innovation recession (see previous article).<\/p>\n
Then there\u2019s the fact that Levi\u2019s is leaning into culture (see Beyonce\u2019s unsponsored song named after it!) while Nike leant into data and apps.<\/p>\n
Finally \u2013 and most importantly \u2013 the major difference in their DTC strategies is that while Nike tried to pivot into \u2018DTC-only\u2019, Levi\u2019s focused on \u2018DTC-first, but not DTC-only\u2018.<\/p>\n
Read:<\/p>\n
Nike lays off 775 workers as it boosts use of automation
\nAdidas lifts profit target as Samba boom withstands tariffs
\nLevi taps Victoria\u2019s secret executive to run global supply chain<\/p>\n
Nike\u2019s mistake was to view wholesalers and retailers as a \u201cfrictional cost\u201d to cut out \u2013 but when it did cut them out, it created whitespace for its competitors to fill and gave them consumers to try their product.<\/p>\n
The rest is history and Nike lost the consumer.<\/p>\n
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CONTINUE READING BELOW<\/p>\n
Levi\u2019s, under CEO Michelle Gass, treats its wholesalers as vital infrastructure for discovery.<\/p>\n
While the group prioritises its own Levi\u2019s (and Beyond Yoga) stores, it has maintained healthy relationships with high-end retailers and department stores.<\/p>\n
This is clearly evidenced in the Q1\/2026 results, where DTC grew 16% (as noted above) and its wholesale revenues increased 12%.<\/p>\n
The latter point here is key: Wholesalers bought more from Levi\u2019s, not less.<\/p>\n
All this may sound too subtle to matter, but these are very volume-sensitive business models. Nurturing all routes to market while maintaining discipline in product quality, innovation and brand-building is important.<\/p>\n
Likewise, getting even one of these aspects wrong can have dramatic and hard-to-reverse consequences (see chart below).<\/p>\n
Levi Strauss versus Nike share price<\/p>\n
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CONTINUE READING BELOW<\/p>\n
Source: Google Finance<\/p>\n
To conclude, I was wrong on Levi Strauss & Co.<\/p>\n
Listen\/read:
Is Levi Strauss the next Nike? [Aug 2021]
Last Levi\u2019s factory standing [May 2016]<\/p>\n
Levi\u2019s is not the new Nike, thankfully. It appears to have learnt from Nike\u2019s calamitous mistakes in building a critical (but risky) DTC (only) business channel.<\/p>\n
Rather, Levi\u2019s is charting its own DTC and omni-channel strategy that has a far more balanced approach \u2013 and given its mere $8-9 billion market cap versus Nike\u2019s $65 billion, it may have a lot more runway to grow into.<\/p>\n
* Keith McLachlan is CEO of Element Investment Managers.\u00a0<\/p>\n
* McLachlan and portfolios managed by him may hold Levi\u2019s shares.<\/p>\n
#Levis #Nike #Part<\/p>\n","protected":false},"excerpt":{"rendered":"
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