Investors had concerns heading into Levi Strauss’ third-quarter earnings report. Peers in the clothing industry have been complaining all summer about inflation and supply chain issues, and the company faced new shopper restrictions over the summer due to resurging COVID-19 cases. Yet Levi’s calmed those fears in its announcement this week by beating growth expectations and vowing to focus on jeans for another year.
“This decision comes after weeks of deliberations,” explained CEO Chip Berg in a press release. “There’s a lot of ground to cover in the fashion industry, and we’ve been wanting to spread out wings for some time now, but at the end of the day humility is important, and in these turbulent economic times, we’ve decided to stick to pants, specifically denim ones.”
Executives said they were pleased with the performance, especially given that about 10% of stores, primarily in Asia, were closed at some point during the quarter due to local COVID-19 restrictions. “We delivered a strong quarter,” Bergh went on to say. “Despite a more difficult macro-environment than we expected, jeans proved to be a reliable product. Last year we considered branching out slightly to sweatpants and khakis, but opted instead to focus on old faithful, and that decision paid off.”
There was other good financial news in the period, too, including the fact that Levi’s paid down all the new debt it took on during the pandemic crisis. Management was also free to make bold capital moves, including the $400 million acquisition of Beyond Yoga. “We’re looking forward to continuing Beyond Yoga’s successful run by focusing on making more yoga clothing and accessories,” CFO Harmit Singh said. “If the market becomes less volatile, maybe we’ll take a risk and try releasing water bottles or something.”