Levi Strauss & Co. (NYSE:LEVI) Q2 2023 Earnings Call Transcript

We grew market share this past quarter. Our market share was up on men’s and women’s. We were up 2 points on men’s to 22%. That is more than double the number two brand in the marketplace. And on women’s, if you’ll forgive me for a moment, I’m going to take a little victory lot here. We took market share leadership for the first time in the 12 years that I’ve been here and the first time probably in decades, with one share point of growth to 7%, we were the only major brand to grow share in women’s. We are also — we maintained share leadership with our key 18 to 30 year old, which is our target consumer, and we gained one share point in the premium tier kind of which is $60 and up, again speaking to the strength of our mainline business, where we are also the market leader.

Europe, real quickly, we don’t have nearly as much information on market size. We don’t get it. We get that data annually and same with market share. But I suspect picture is probably pretty similar. Excluding Russia, as you heard in the prepared remarks, Europe was up 2%. That’s coming off of a 15% base. And the picture is pretty similar, DTC very, very strong. Our DTC business was — excluding Russia, was up double digits. Traffic is still up mid-single digits in our own channels and comps are up double digits in Europe. Our second half comparison, by the way, get much easier, both in Europe and in the U.S. And so, that is kind of a tailwind from us from a numbers standpoint. But in Europe, we are also seeing softness in U.S. — in Europe wholesale.

The wholesale customers are being cautious with their open-to-buy budgets and wholesale in Europe was also down for the quarter. So I think without having as robust of data as we do for the U.S. and Europe, I would say the picture is fairly similar. Europe, for us, is more of a premium market. So, even in wholesale, it tends to be Tier 2 product across most of Europe at higher price points, but the general dynamics are very, very similar. Harmit, do you want to…

Harmit Singh: Yes. So let me talk the levers that we could push further. But let me just talk a little bit about what we’re doing. So overall, Matt and everybody on the call, you’re familiar that as things tighten, we can really tighten expenses. COVID was a good example and readjust our expense base to whatever new revenue base there is. What we’ve been doing so far this year because, it’s not only a tale of two halves is also a tale of two worlds, and it’s a tale of two channels. The channel — international is working. Direct to consumer is working. So we’re putting — we’re reallocating resources to fuel those businesses, and we’re tightening costs related to U.S. wholesale. The other thing we have done overall is, we’re really focused on discretionary costs, and I’ll give you some examples.

We have tightened travel. We’ve tightened new hires and the like. So for example, on travel, because we’ve been this business for the long term, we’re still ensuring that people travel to meet customers, meet consumers, while most of the other travel is kind of on hold. If things get worse, we will look at what’s still open. Hires, we’re not hiring new heads. We’re hiring critical heads. If things tighten, we’ll tighten that and take a hard look at fixed costs from that perspective like we did during COVID. So again, realigning our cost base to drive the prospective revenues, I think, is an important principle. And we have tightened quite a bit the few other options available, but we run this business for the long term. But the important point to think about Matt is, and I think I said it in my prepared remarks, there are some critical pieces that are becoming tailwinds.