Levi Strauss (LEVI) may be best known for making men's blue jeans, but women's fashion is a key factor fostering share growth.
Shares of the San Francisco-based company were surging in early afternoon trading Wednesday after a positive earnings report Tuesday evening.
However, the headline numbers may be outweighed by some key factors that sustain a growth model for the company. One of the aspects is continued growth in the sale of women's products.
"Our strategy to diversify the business by expanding for more into tops, women's under-penetrated markets and with our value brands continue to deliver strong results," CEO Chip Bergh told analysts during Tuesday's evening's earnings conference call. "Our total women's business grew 18%, which was the 15th consecutive quarter of growth in women's with the last nine quarters being double-digit."
The continued strength in women's items was noted by CFO Harmit Singh as the biggest contributor to the earnings beat, more than doubling the growth in the already saturated men's category.
As women's category sales represent about 30% of total sales currently, there is certainly room for expansion.
The underlying trend could well sustain growth for years to come as well, as more women - especially younger consumers constantly eyeing fashion trends - flock to denim products.
According to Euromonitor, jeans targeted at "curvier" women are a key selling item for Levi's specifically and have spurred the rapid growth of the segment in the U.S. and Mexico.
That extends beyond jeans as jackets and tops are key items flying off shelves.
The Guardian recently called "the denim jacket the new power dressing", citing celebrity acceptance of the fashion choice and adoption in fashion shows as an indicator that they can provide growth for manufacturers beyond traditional jeans sales.
While the anecdotal evidence of a strong fashion trend in the West is worth noting, the stats in Asia are even more compelling.
The global denim market was valued at $56.2 billion in 2017 and is forecast to witness a CAGR of 5.8% through 2023, according to Prescient Strategic Intelligence. The shifting attitudes toward denim in the Asian market are noted as the key accelerant for this trend.
On a more granular level, women in China are among the most appreciative of denim styles in the region, according to Euromonitor statistics. That being the case, the tap into not only e-commerce trends, but a focus on women will be pivotal for Levi's to gobble up market share. So far, this looks to be the Chip Bergh-led company's aim and should sustain the growth many are forecasting for the newly-public name.
To be sure, the growth in athleisure globally threatens to cut into skinny jeans sales that remain the largest category on the basis of its comfort focus and form fitting style for women. The underlying trend has allowed companies like lululemon athletica (LULU) to command an over $20 billion valuation and a forward multiple near 50.
An activewear bias from women consumers could create a constraint for growth of denim products overall that are not suited to exercise.
However, it is not a zero-sum game, as NPD Group, a New York-based market research firm, noted that denim sales can coexist with athleisure.
"Jeans have always offered form, fashion, and function but now they are offering the comfort today's consumers want," NPD chief industry advisor Marshal Cohen said. "It's a win-win for consumers, jeans manufacturers, and retailers."
