Earlier this year, women started flooding Levi’s website searching for a men’s jean. The 517 — a slouchy, lower-rise cut — is the style Carolyn Bessette Kennedy wore, and it features in “Love Story,” the series about her romance with John F. Kennedy Jr.; the search bar lit up. Levi Strauss (LEVI) did the sensible thing: it showed those shoppers the 517, then its wedgie bootcut and 501 ’90s fits, cut for women’s bodies. Kelly Cloonan’s report in Monday’s Journal is that rare fashion story with a balance sheet attached: ’90s nostalgia has the brand founded in 1853 on what analysts call its strongest footing in years, and it reports third-quarter results this week.
The numbers: Levi’s sees sales growing as much as 7.5% in the fiscal year that ends in November. Set aside the post-pandemic bounce and that’s the fastest annual revenue growth since the company relisted in 2019. First-half revenue is up more than 11% on a reported basis, to $3.3 billion, and management has raised full-year guidance twice. Analysts still call the outlook conservative. The engine, says Jana Henning, who runs merchandising for the women’s business, is low rise — the style that caught on at the end of the ’90s and that Levi’s then let stretchier, lower-cut rivals own for years.
There’s a strategy under the nostalgia. Levi’s spent most of its life as a wholesale men’s denim business — the same rigid jean it once made for gold-rush miners — sold through department stores. Now it’s selling direct through its own site and a growing fleet of branded stores, which lets it put the on-trend fit in the window and the slip dress, leather jacket and baby tee beside it. Shoppers like Jackie Schexnaider, a 47-year-old content creator in Lafayette, La., who left for AG, Gap (GAP) and Paige years ago, are buying rigid denim off the website again.
Sales are up. Profit, less so.
Now the part the earnings call will be about. Profit isn’t rising as fast as sales — marketing costs, tariffs and a shift to outsourced order fulfillment are eating the difference — and analysts told the Journal the store expansion is a real gamble: branded stores demand real-estate and merchandising skills Levi’s never built as a wholesaler, and they only pay if a customer squeezed by gas and other prices keeps walking in. BNP Paribas’s Laurent Vasilescu put it bluntly: “If you build them and the consumer doesn’t come, you’re kind of screwed.”
Our read
This is an Investments (IN04) piece with a Behavioral warning label. The fastest way to buy a stock badly is to fall back in love with the product. Levi’s is a real turnaround — the sales line proves it — but the stock question is whether the margin follows, and this week’s report is the first honest reading of that. Fashion cycles are also just that: cycles. The brand that owned the ’90s missed the years after because it kept selling through department stores while the trend moved on. Nothing says the current wave is permanent; the company’s own guidance is built as if it isn’t.
LEVI isn’t owned here, and nothing is being added; it’s on the watch list, which is where a story like this belongs until profit growth catches sales growth. If you own it because you remember your first pair, that’s a fine reason to buy the jeans and a poor one to hold the shares — size it like the consumer-discretionary bet it is. Checking what sits in your portfolio for sentimental reasons is a 15-minute job, and it’s better done before the earnings call than after.