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'Denim is strong and not going away': Retail analyst on Levi Strauss

Katie Krzaczek
Associate Editor

Levi Strauss (LEVI) reported earnings on Thursday, reporting a 4% decline in profit but revenue that beat analysts’ expectations. One retail analyst pointed out before earnings that Levi will continue to be a good bet for investors because denim is not just a passing trend.

“Denim is strong and not going away,” Melissa Gonzalez, CEO of retail strategy firm Lionesque Group, told Yahoo Finance’s YFi AM. Levi has been focusing more on direct-to-consumer sales, and Gonzalez said that casual dress is going to be a driver for direct-to-consumer retailers moving forward.

She cited Madewell’s boom in the women’s clothing space, and its expected spinoff from parent J. Crew. Madewell offers services like custom tailoring and embroidery in its retail stores, drawing consumers away from an online-only model.

“More and more, brands are investing and creating these moments of storytelling and building a relationship,” Gonzalez told Yahoo Finance. “And as long as they continue to look at their retail stores as an opportunity to do that and focusing on things like customization and what differentiates them in building community around the brand, then that's just going to help with the stickiness of their brand and helping them stand out in an otherwise kind of crowded market.”

Gonzalez told Yahoo Finance that Levi’s has done a good job at “focusing on building a relationship with consumers as a brand and shifting away from a wholesale-only business.” Still, in its earnings report, Levi noted that net revenue declined 3% in the Americas due to a decline in the company’s wholesale business as it shifted to direct-to-consumer.

Still, Gonzalez said that building the brand beyond denim has fared well for Levi so far, and will likely continue to keep momentum behind the company’s growth.

“People are looking for outfits around the jeans,” Gonzalez said. “So they are seeing strength in kind of diversifying that product mix.”

Follow Katie on Twitter: @hashtagkatie.

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