Levi Strauss & Co. (NYSE:LEVI) Q1 2023 Earnings Call Transcript

Harmit Singh: Yes. Sure. Ike, when we were talking about a quarter ago, I think we had anticipated the timing of the ERP and the discussions we were having with our key customers the range of the sales push between Q1 and Q2 would be about $80 million to $100 million and as we mentioned on the call, I think the timing is about $100 million between Q2 and Q1. I do want to thank our wonderful customers because they were able to work with us in getting this — just as we work through the timing of the ERP is currently being implemented. So our DCs, for example, are shut as we speak, and we are in the process of cutting over. I think to your question about Q2, a large piece of the $100 million is what we actually take from Q2 and pull it in Q1.

So Q2 will be impacted with that. And that’s why as we think about what to expect in Q2, we’re guiding down high single digit, low double digit, that obviously also has a positive impact on gross margin. That’s why we’re saying gross margins will be down a little bit, not what you saw in Q1. So, I think that’s how we’re thinking about it. We do expect the impact of the ERP to largely be in H1 because the ramp-up really happens in May, which is the last month of the quarter. And so by the time we get into quarter three, I think we should have this behind us. And as you know, we have implemented the ERP in Canada and Mexico and is largely a very standardized module that’s being implemented in the U.S., and the benefits are largely going to be in data insight and simplification for our operators.

That’s what we’re seeing in the two markets and that’s the benefit that we see. And it is foundational to everything else we’re doing, and especially as we grow e-commerce and we grow our direct-to-consumer business, this gives us the foundational base to actually accelerate automation and connect with the consumer a lot better.

Operator: Thank you. Our next question comes from the line of Dana Telsey of Telsey Group. Your question please Dana.

Dana Telsey: As you think about the performance of denim versus non-denim, what did you see there? And Chip, you’ve given out in the past what the overall apparel category, how that performed versus denim? What are you seeing there? And can you just expand upon with wholesale? How do you expect that to progress through the year? And is there a difference between the department stores or the discounters and what you’re seeing in order rates?

Chip Bergh: Yes, there’s a lot there. So first of all, you’re right, I normally do give the apparel category, and I didn’t this time, but I’ve got the number here in front of me. Apparel was up 2%. This is U.S. data again for Q1. Recall, I said that the denim category was up 1% off of a base of plus 16. Apparel was up 2%, I don’t have what the base period is for total apparel, but it was up slightly ahead of denim, and that’s consistent with everything we’re seeing and hearing that some of the more dressier categories is doing a little bit better. We’re even seeing that in our own business. Our non-denim business has done pretty well. It was up low double digits as well on some of our best-selling items right now are chinos and cargoes and things like that. We’re seeing it really, those categories moved really well. What else was in the question?