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And now for the main event…

While many in the fashion and retail business are busy debating the revival of mall brands, one heritage business has been steadily staging its own quiet renaissance—without ever having gone away. The cultural dominance of Levi Strauss & Co., the Gold Rush–era workwear brand, has ebbed and flowed with the times, from disco to low-rise to a hipster preoccupation with Japanese selvidge. But it’s always been the undisputed leader of American denim. Of course, the company’s stock isn’t quite as impressive as the brand, with shares trading for about 30 percent below the I.P.O. price in 2019. Nevertheless, the company throws off tons of cash, has a healthy dividend, and surprised to the upside on earnings in its latest quarterly report. Sources credit the transformation strategy started by former C.E.O. Chip Bergh and continued by Michelle Gass, who became C.E.O. last January. Beyond the immediate numbers, however, there’s the longer-term question: How does a 170-year-old denim pioneer connect with new generations? How much of the brand’s success is the result of its strategy, and how much is owed to a shifting pop culture in which rappers are wrapping themselves in American denim?

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On the strategic front, Levi’s has made it a point to upgrade their direct-to-consumer experience—with tech-enabled tailoring and mobile app exclusives—and, as Gass has put it, “transforming into a D.T.C.-first company.” So far, the e-comm push is working: The direct-to-consumer segment has grown steadily as a proportion of the total business since 2015, from 29 percent to 52 percent. Those digital investments have not only driven sales growth, but also significantly boosted profit margins compared to their traditional wholesale business. As a result, Levi’s is becoming less and less reliant on wholesale, which now accounts for less than half of the business. With stores in more than 110 countries, the wholesale operation of the world’s leading jeans company is a messy, sprawling management challenge—particularly in Europe, where Levi’s faces increased competition from local brands, different consumer preferences, and a fragmented retail landscape with partners who lack the digital integration that Levi’s has built internally. Levi’s stores are a mixture of franchises and owned locations. When the location is franchised the revenue counts as wholesale. (This is yet another reason why net revenue in Europe has been a challenge.) Without control over presentation, assortment, and customer experience in these locations, Levi’s struggles to deliver its usual premium brand positioning. And while solving this riddle could unlock significant growth, it also ossifies the focus on the brand’s D.T.C. potential.

If you went looking for a powerful, impromptu brand ambassador, you could do a lot worse than Beyoncé, the global genre-bending pop queen who’s been reclaiming her Texas country roots in her Levi’s cutoffs. Levi’s has powerful cultural currency—truly, it’s up there with Coke and Nike among the world’s most recognized brands—but the sight of Beyoncé and Post Malone performing the denim-on-denim song “Levii’s Jeans” during the NFL Christmas Day halftime show was a marketing gift. (Naturally, the company noted the occasion, briefly changing its logo on Instagram to “Levii’s.”) The company is poised to take further advantage of the cultural moment. Beyoncé has already had three drops in partnership with the brand, and with her world tour kicking off early next week at SoFi Stadium, I expect lots of Levi’s to be in the crowd—along with plenty onstage. Someone familiar with the brand told me that Paul Dillinger, Levi’s head of design innovation, has been working on denim for the backup dancers. This is precisely the kind of placement that strengthens the idea of Levi’s, in Gass’s words, as “firmly at the center of culture across the globe.” According to one plugged-in retail source, Taylor Swift’s Eras Tour brought increased revenue for Levi’s in every city she visited, and her tour wasn’t even directly connected to the brand.

But it isn’t all diamonds and denim for Levi’s—there are tensions in the portfolio, too. Late last year, Levi’s classified its Dockers subbrand as “discontinued operations,” essentially conceding that they intended to explore a sale of the underperforming brand—an end of an era for a once-prominent business casual line. Meanwhile, category competitors like Dickies and Carhartt have been enjoying renewed relevance: Dickies now has Chris Goble, who worked at Gap for more than 18 years, modernizing and reimagining their line. Carhartt has their Work In Progress (or WIP) collection, which, while a small part of the business compared to its traditional workwear, is enough to give them fashion cred that Dockers (a punch line, even if a profitable one) never achieved. Tariff-related uncertainty has also complicated the valuation process for Dockers, I’m told. But Gass’s decision to engage with potential buyers, and to make difficult decisions about culling Levi’s portfolio, speaks to her willingness to refocus the business on areas where the growth potential is the most significant. (It helps that less than 2 percent of Levi’s products sold in the United States are now produced in China, compared to 16 percent in 2017—the result of a deliberate diversification strategy initiated by Bergh.) On the opposite end of Levi’s portfolio spectrum is Beyond Yoga, the supersoft, size-inclusive activewear brand that Levi’s acquired for $400 million in 2021 in order to diversify beyond denim (and grab market share with women). The brand has shown impressive momentum, growing 10 percent in Q1 and now doing more than $125 million annually under the direction of newish C.E.O. Nancy Green (formerly of Old Navy and Athleta). While activewear remains in growth mode, the acquisition strategy deserves scrutiny. With core denim business showing renewed vigor, should leadership divert attention and resources to building secondary brands? The Beyond Yoga business is vastly different from Levi’s—in fabrication, marketing, creativity, sourcing, and factory relationships and wholesale accounts. Currently, Beyond Yoga has seven store locations, five of which are in California. To build brand awareness they will need to expand to more store locations. In any case, Levi’s has a solid story to tell right now, even if the stock is lacking similar narrative momentum. The company’s leadership deserves credit for dramatically expanding margins to 62.1 percent—far above Gap Inc. (38.9 percent in Q1), American Eagle Outfitters (37.3 percent), and Kontoor Brands, which owns Wrangler and Lee (44.5 percent at the end of 2024). That strength derives from Levi’s robust D.T.C. channels, supply chain management, and operational efficiency, and from not being overly reliant on markdowns. Whether Gass can successfully offload the Dockers brand and build up Beyond Yoga without distracting from the core business will be the key to continued success.

Until tomorrow, Lauren P.S.: We are using affiliate links because we are a business. We may make a couple bucks off them.

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