Net Profit Declines Narrowing Cowboy Brand Levi' S Attaches Importance To The Development Of Tops And T-Shirts.

According to the data, the growth rate of the global jeans market is not very high from 2018 to 2023, while the average growth rate of the jeans industry is 6.7%. Nowadays, jeans garment enterprises are in a low cost and low profit competition. They are in a passive position in the market operation, which hinders the development of enterprises and the upgrading of the market, and increases the difficulty of transformation.

The 166 year old cowboy brand Levi's has embarked on the road of transformation after re listing, no longer focused on men's clothing, began to expand the female market, promoted the business of women's industry, and began to pay attention to the consumers after 90 and 95, and more to younger transformation. At the same time, Levi's abandons the traditional jeans style and releases new jeans according to the trend of fashion to cater for the current sports and leisure style.

After 7 months of transformation, Levi's's performance is still unsatisfactory. Following the 17% quarter net profit decline of the second quarter, net profit in the third quarter narrowed slightly, and fell by only 4.2% to 124 million 500 thousand US dollars.

In October 8th, the American cowboy clothing brand Levi's released its third quarter results report. Its sales volume reached $1 billion 450 million, up 4.3% over the previous year, exceeding analysts' expectations of $1 billion 440 million, and net profit of 124 million 500 thousand US dollars, down 4.2% compared to the same period last year, with a gross margin of 53%.

By region, Levi's in the Americas camp has a total revenue of $771 million, a revenue of $463 million in Europe, and a revenue of $213 million in Asia.

According to the financial report, Levi's's direct consumer oriented business grew by 12% in the three quarter, mainly due to the expansion of the retail network and good performance and the growth of e-commerce. In addition, the net revenue of Levi's wholesale business grew by 1% over the same period last year, up 2% on the basis of fixed exchange rate, reflecting the growth of Europe and Asia.

As of Tuesday's close, Levi's shares fell 4.1% to $18.96, and the market capitalization is about $7 billion 400 million. In March 21st, Levi's's parent company reopened in the US NYSE after 34 years of privatization. The issue price was $17, while Levi's IPO rose 31.82% on the first day, closing at $22.41, after which it continued to rise by nearly 1%.

Levi's's first earnings report was on the rise after the re listing of the company. Its operating income in the first quarter ended February 24, 2019 was $1 billion 440 million, an increase of US $100 million compared with the same period last year. Net profit was $146 million 600 thousand, an increase of 81% over the same period last year. It can be said that a good start has been made for the listing, but it has not been maintained. In the second quarter, net profit began to slide 17% to 29 million US dollars, lower than analysts' expectations. In addition, the fall in performance prompted Levi's's share price to fall by more than 12%.

This stimulated Levi's to accelerate its transformation, diversify its orientation, become younger and customize, and want to get rid of the growth of single category. Levi's sells products such as sweaters, jackets, T-shirts and so on, and sells them in a customizable way.

As a key market for clothing development, China accounts for 20% of the global garment market, while the size of China's denim garment retail market will be only 300 billion yuan in 2018. Levi's 2018 China's market revenue is only about 3% of total revenue, so China has also become a key market for Levi's growth.

Amy Yang, managing director of Levi's Greater China, told media that at present, Levi's's strategy for sales channels is expanding with emphasis on expanding the second tier cities while consolidating the first tier cities. Levi's makes good use of existing stores, does not pursue the number of shops, and does not pursue premature subsidence.

The growth of Levi's in the Chinese market is mainly due to the rapid growth of women's groups and the growth of top garments and non cowboy businesses. Tops and women's clothing business are also one of the key directions of Levi's development.

It is worth noting that in August 5th, according to Reuters, Levi's has been moving its production out of China because of the uncertainty of China's import tariffs, so the supply chain has been transferred to countries such as Vietnam and Bangladesh to reduce production costs. It is understood that at present, Levi's has two separate factories in Poland and South Africa, while third party suppliers are distributed in 22 different countries and are used more.

As the market changes, Levi's no longer rely on men's jeans to maintain business growth. Although the brand is the largest selling product so far, consumers' consumption patterns and preferences have gradually changed. Levi's has begun to expand the category of jeans, printed T-shirts, sweater and other tops, and has brought better results. Over the past three years, sales of Levi's tops have doubled and more than $1 billion has been broken in 2018, and the potential market value is immeasurable. Data estimate that Levi's can sell a T-shirt every second.

Vans's parent company VF group split Wrangler and Lee denim business to set up Kontoor Brands Inc; JACK&JONES Jack&Jones announced last year to return to the cowboy market; Guess refocused on cowboy business; HM international bought the Cowboy brand Denham. The constant attention of enterprises and the "fat" of the "denim" market shows that the jeans industry is no longer a single Levi's company, which has intensified the competition in the field of jeans.

In view of the volatility of performance, Levis emphasized the performance guidelines for 2019: the annual net revenue growth of fixed exchange rate is 5.5% to 6%, the annual capital expenditure is about 190 million US dollars to 200 million US dollars, and the number of new stores is expected to be 100.