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

Chris Nardone: Two quick questions. On second half guidance, can you just talk about your confidence in maintaining that strong DTC momentum on a potentially lower promotional environment compared to the last second half? And then a quick question on Asia. You increased your guidance up low double digits, and that’s on top of mid-20s percent growth last year. Is there any way you can elaborate on where you’re seeing the most strength in Asia and how much is coming from new doors versus comps?

Harmit Singh: Yes. Yes. Thanks, Chris. Asia. As you know, growing Asia is one of our strategic initiatives. And the last two years, the noise has been just COVID and some country close, et cetera, et cetera. So I think Q1 is a good read from that perspective now. Q1 doesn’t reflect the reopening of China because that happened largely in February. But most markets in Asia are off to a great start. And you can see the leverage in our operating margin as well as operating dollars, whether it’s India, whether it’s Australia, whether it’s other South Asian countries. We had a good quarter from that perspective. The brand is strong is largely a DTC business and the direct-to-consumer business is — or the growth is largely driven by comp sales performance, which is the good news.

And we haven’t really factored in any upside should — what we see in China continue or sustain itself for the rest of the year. So that’s the Asia story. You had another question, Chris. One with the, yes, strong DTC, ONE, we think Asia sustains itself as the year progresses because the brand is strong. Consumer’s a lot more resilient. It’s a younger consumer so I think all that really helps. To your point on DTC, DTC last year did slow down in the second half, largely Europe was down. Q3 and Q4 was down. And we have seen Europe rebound. The consumer in Europe, our view is a lot stronger than everybody anticipated. And while wholesale customers continue to be tight on the open to buy, we see the DTC growth continue. The other piece is we do have a new Chief Digital Officer, and Michelle is putting a lot more emphasis on driving our retail performance and I think those things definitely will benefit us because there is low-hanging fruit and as we continue to focus on improving execution, our operators on the ground do a great job, but the clear opportunities.

And I think as we continue to optimize that, we will continue to see DTC performance improve.

Operator: Thank you. At this time, I’d like to turn the call back over to the Company for any closing remarks.

Chip Bergh: Thank you, Latif, and I want to thank everyone for dialing in and for your questions, and we’ll look forward to talking with you at the end of the next quarter. Thanks very much. Have a nice weekend.

Operator: Thank you. This concludes today’s conference call. Please disconnect your lines at this time.