Levi Strauss & Co. (LEVI) 6 Apr 232023 Q1 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Life Strauss & Co First Quarter Earnings Conference Call for the Period Ending February 26, 2023. All parties will be in a listen-only mode until the question-and-answer session at which time instructions will follow. This conference call is being recorded and may not be reproduced in whole or in part without written permission from the Company. This conference call is being broadcast over the Internet, and a replay of the webcast will be accessible for one quarter on the Company's website, levistrauss.com.

I would now like to turn the call over to Aida Orphan, Vice President of Investor Relations at Levi Strauss & Co.

us our call XXXX. first joining the to for for results fiscal you on today the discuss Thank quarter of

me Harmit are of call and on President Joining CEO and Growth Chip Officer. Levi our Singh, Bergh, and Chief Financial Strauss; today's

section complete the IR webcast be conference can our have of on posted our found release The also site. financial today's QX We website, on in investors.levistrauss.com. results earnings the of to our link call

quarterly will be Actual We'd forward-looking remind materially like filings that we involve today results forward-looking uncertainties. to to this with section that on our Risk the and SEC, from our which our our results and the making call, Please by for could everyone in statements differ XX-Q review statements. cause Form those of risks particular, that contemplated could we on the report Form in factors filed the Factors our differ. XX-K information included

based this these statements. Also note assume of to any that are and update today, as no the available on obligation we forward-looking call us of to on statements information

During not certain non-GAAP a most to press release. GAAP measures. non-GAAP for this of substitute intended Reconciliations GAAP measures our results. be included measures non-GAAP measures to we in today's call, our will These discuss their are are comparable financial

addressed. scheduled give replay questions have is this a time will call be at call Finally, opportunity the the others yourself one call website, shortly. to in the to its please entirety limit Today's is of question IR and available being webcast hour, to on their a one our website so on for

over now, I'd call to Chip. like And turn to the

first and the year reported billion, a call. everyone, to of Coming on year. currency inventory a in strong currency our XX% while strategic We quarter to key the off solid basis advancing to revenue morning, X% grew to constant were on driving and growth period in progress off Good X% welcome, ago constant initiatives plan. start today's and our $X.X

with growth record revenues, ahead globally. our accelerated In strong business, representing global growth of direct-to-consumer sales, points We DTC in constant last delivered year. XX% currency, of to XX% three

Our currency, of constant in XX% grew international accounting revenues. total our business XX% for

the U.S. we shipments top our of wholesale expectations excluding ERP results even EPS. planned implementation, and our line achieved support to And for solid acceleration exceeded

our our Our of of brands, performance clearly our benefits working, business this business the strength diversified quarter and are by demonstrates the driven growth the a direct-to-consumer globally model. of strategies

note and make our with currency. priorities, portfolio. our continue Please and progress the growth revenue balance I brands, of remarks, our diversifying against strategic three that leading direct-to-consumer our constant our reference We in for business to prioritizing year-over-year will Harmit

amongst first priority, brands. market Beginning grew share target key U.S. XX-year our share number with bottoms old Starting leadership position. again achieving the with in we the in the quarter, to we Levi's women's this gap the XX- group, to one consumer share grow and our to closing with the leading brand, continue denim

highest revenue bottoms, women's bottoms QX delivering its fuel any which Men's grew X% continue we women's quarter, X%, of Levi's the with brand to growth our XX%. up momentum In business bottoms geographic was grew a segments, across with quarter. in bottoms record and all men's and achieving the

jeans. Company, important and all for the solid XXXth which openings, for in and today's is in our of our mid XXX, the to anniversary the the We're of steady XXXX modern lean our the leg marking newly Noddy's shift year, with trends, planning into year iconic and through quarter. rise cadence like drove women's of a Food high launched from we to blueprint newness wider XXXth growth an and Balloon continue blue XL and

February, ever a worldwide. and the with of opened of wearing the the As worn. where next shell launched X we milestone grams Bunny largest cement the billion this also XXX off our impressions using kicked has the marketing vintage consumers greatest during helped pants. pair to brand, In campaign Bad It story we're drive nearly heritage important global coordinated Levi's namesake our celebrate generation we of

pre-pandemic has and XX% these on strength reported and close basis. all which years, the top After continues point proof nearly net XXX $XXX of a QX higher million, up on to exponential expected brand. year year this for love XX% were the growth, to the experience of only XXX grown solid XX% the growth to of last revenues reach for than is are a revenues

iconic fits. we're our XXX infusing newness through energy we her and for through inspired year, launches and As new into him the move historical by

a Stussy, which have ambition the NewJeans, popular brand exciting of hour one planned our streetwear girl like partnership also robust with sold band consumers. collaborations with iconic the lineup our an drop younger to We in K-Pop and furthering engage out recent

delivered traffic growth business DTC positive in ago, stores outlet mainline a record versus segments well sales comp and as global all brick-and-mortar Our across as XX% a by driven geographic quarter, e-commerce. and up year

another Our larger U.S. U.S. strong achieved tourist in and also DTC business our performance quarter destinations. especially with of revenue, flagships record

opening We stores our in mainline XX here continued U.S. the store including five doors expansion Levi globally in QX,

brands driven numbers, The investments with XX%, consumers stores growth business and making digits. our global our to broad-based across to all double elevate including up was experience by large to e-commerce are in grew digital strengthen paying and off. levi.com, which their consumers' digital returning brands, we're our our connection Even

expand of while improving our experience. continue the offering online the user We breadth to

loyalty of also higher was nearly XX spend in to Our membership to among loyalty million QX continues this almost XX% and a members, translate members. up level to

Our international accelerated by impact U.S., Global performance X%, grew primarily softer due QX QX our U.S. the direct and wholesale wholesale in of strong QX ERP Asia driven of implementation. and wholesale mitigate to to revenue with our In Canada. million primarily helped revenue. approximately the continued $XXX from business and consumers relationships we

year's last XX% on result, of As grew low growth. a our strong top wholesale business U.S. digits single

from most notably core consumers, resilient, generally our while impacting to demand remained softness and Signature value-oriented our experience brands. consumer Additionally, has Denizen the continue we

As with Dockers and continued international, opportunities the growth. strong our strategy, and quarter other tops contributing Beyond major brands, for our diversification growth each positively Yoga, achieved we have women's, in first of we momentum the to each our

revenues Russia, were Germany growing growth. to or with XX% most X% Russia. XX% markets growth, returning and excluding up our Europe France, markets saw U.K. excluding largest including International of the

we Asia after latest growth In continued a traffic levels. was its experienced XX% seen results COVID back than to in other have policy strong the with as pre-COVID we all China. momentum, up our across lifted, back China, bounce trending markets Zero

and XX%, double-digit strong revenue grew by the growth Total company women's led Americas in both Asia.

with Dockers channels DTC channel, X%, grew growth DTC across in revenues XX% both especially net And our to XX% geographies momentum with women well with for strong. and brands double-digit by last men. year strong business other performance in growth up following XX% build quarter. continued our tops the and broad-based performed up Our and driven

with e-commerce in is Dockers with XX% and XX% U.S. of driving by over of the and AURs line Europe. to up continued remained progress sales the continues in with over across and part robust loyalty Yoga channel volume increased program, this by DTC make dresses. supported brand's which success expanded growth the revenues And driven XX%, Beyond and solid repeat now brand's customers

the to stores balance year. further several Our good openings are with of two off with first along to planned through more start open the QX, a two in

Michelle for Levi's days responsible and global for company Gass brand has our the Finally, XXX digital Company and with as commercial been operations. President, now the

clearly has she She determined this to surprisingly, not expected, a transition. inside organization, our working on I with great make As both and I very really establishing the successful leadership together business. well very are of her us landed

and accelerate and our the she eventual as businesses. women's For and profitable optimistic when about this and growth we will in my more than experience organization DTC hired retail and deep identifying obvious tops future us is executional e-commerce was Michelle it to even both is help which opportunities, I'm company's today I successor, organizational was excited before. and confident already

I to that, now over Harmit. with And the turn will call

benefit ERP QX business XX% business the related And single total progress inventory almost transition, quarter. fueled in dollars excluding our with our sales inventory accelerated structural international meaningfully. on and achieved U.S. Focus the units low channels solid our and our up shift results wholesale direct-to-consumer grew business significant with strategic reducing our We Chip. in primarily initiatives X%, the Thanks the our to shipments in the driving digits. growth and made we of with results from down

HX, following two part new us the putting this Mexico. continuing inventory We as year. in committed the a costs including implementations on have to our Canada term, in in ERP as the move with U.S. in clear expenses as stronger the U.S. long focus opening of discretionary We invest to to through while the well by remain we taking implementation position receipts net a stores and controlling reducing achieved balance in deliberate XX and successful actions in for

this the and making our beat despite about progress we as a momentum the in guidance maintaining on And environment delivered and the remain direct-to-consumer the outlook annual our revenue international we macro we cautious against range, excited EPS reflecting are even and businesses quarter, our we're strategy.

Net International revenues continued across was color I X%. X%, XXXX direct-to-consumer markets, driven and global results revenue most U.S. business. will our with more increased the QX were while XX% provide in now by outlook. performance momentum on our greater-than-expected up up

categories and across brands. digits, mid-single up growth were AURs driven genders, by broad-based geographies,

driven XX%, of broad-based traffic, channel last Our comp driven by geographies, top on higher strong by sales accelerated higher Europe. and revenues U.S. year, positive quarter up in volumes across extremely including net sequentially the growth first comp sales direct-to-consumer with and

year's in ago, short position deliberate basis a U.S. on greater-than-expected the to in points in but XXX moment Adjusted in through inventories gross points a inventory that XXXX XXX year. reduce below we took term, we promotional level more sets stronger mentioned ahead reported us margin of record margin a but The pressure levels. last pre-pandemic gross the I XX.X%, that up move XX.X% with environment was the as and coupled actions the resulted basis

and lower Gross price negative favorable margin basis expenses mix a points wholesale increases, XX channel impact shipments. accelerated despite benefited from freight from

logic were points a higher offset full-price including factors, impact costs, freight from higher product transitory impact However, demo those and as ocean sales. lower record as XXX XXX point reflecting benefits from nearly prices, basis basis well by cotton charges several

our cotton higher as margins recede, unfavorable geographic costs benefit mix selling to full-price such As and pricing, lower spoken we year, impacting through about will FX from contributors And should as year. including freight and to last key demurrage headwinds have we to product given channel, you lower and well as favorable lapping the HX margins. structurally from continue move charges the begin gross the that to women's margin

our was in DTC which XXX marketing by a the primarily quarter driven last the in investment to sales million, expenses first support SG&A higher investment $XXX and skewed four-wall A&P the is year, of X% for half from spend campaign Adjusted year. of to the up support the

from by adjusted in was diluted XX%, decrease the margin year, foreign with almost negative EPS EBIT decline rate. in line came our penny exchange. our from the with at gross Adjusted $X.XX, a XX.X% While last margin was driven down impact entirely expectation

through excluding to driven America prior top double-digits now of and X% growth achieved revenues of DTC by our nearly across second Europe the XX% year, of in our segment. channels returned quarter X%, I'll revenues revenue. DTC. the in on by by in strength and The by take with business. grew you key driven increases Canada net net growth, record our the U.S. In all upload was high-single-digits Latin grew driven up in double-digits the region. markets Russia Overall, Americas, highlights the

was growth most across seen Geographically, countries.

continued France, for the accelerating Italy up collectively to and revenues Strong were low-single-digits all outside led China XX% with the driven Levi's and Spain double-digits. markets demand Germany largest by brand UK were by up India. Asia in and channels markets Our growth with

was Asia XX%. ex-China up

China this mentioned, seeing profitable trends in year. expect improve and Chip As now are China we turn to

operating margins higher to margin were basis XX.X%, an XXX expanded operating due SG&A. points revenues also all to dollars lower And record. and Asia time

to flow. our balance looking cash sheet and Now

product are we inventory improvement the the on than transition, ERP of as represents inventory. up a basis a reducing XX% execute more over levels. XX% discussed as reduce result past receipts to our in we actions last rapidly X/X of and was up of HX, from quarter total Core our a inventory QX As dollar XX%. year, sequential

line two QX in growth lower quarter-over-quarter year. expect continue of expect with to and We substantially be sequential by quarter being end improvement levels than the the with sales to

million $XXX capital negative quarter, Adjusted free first and of flow by cash implementation driven was timing in the our of ERP. the the

the we inventory As through to a our support year. result we improve our position, sequentially of this, our used revolver cash as

to billion. us pay turn We expect our flow positive, approximately back $XXX $X.X free and ABL debt liquidity of million was to And net overall cash course enabling draw. was

shareholders, in Company Our dividends up leverage XXXX X.X at X.X declared free In approximately capital times quarter. $X.XX cash line negative of including per million from $XX increase million in XX% the with year. of to And of the to quarter, remains to prior quarter flow. it did compare 'XX, returned strong, nearly share of we to the a ratio QX times in due although end a XX last dividend first QX the

Moving outlook. our outlook, and we early year is exceeded cautious reaffirming we stance QX, it EPS on the to are XXXX a revenue though in maintaining expectations our even uncertainty, and and fiscal in macro given

range the reflecting $X.XX We growth revenues continue and to expect $X.X are a billion net to reported to $X.X year-over-year, $X.XX. X% in billion X.X% EPS of and between

overall, change global guidance and which we momentum in to the businesses international and retailers Europe expectation, DTC the in wholesale to as expect open U.S. previous softer buy. trends in cautious our maintaining the we're with from way we our continue offset to your head the get strong While be

a in the year, from international coming mix nearly we a XX% range. Levi's for business and of brand revenue total the mid As our DTC XX% result as of expect

America fast business Our margin high growth dollars, low categories are U.S. tempered to in and Americas be DTC both importantly Latin gross given the for and full we continue strong our in businesses. reported the channel wholesale. DTC and under In by will U.S. international our these as our opportunity year in businesses with expect growing tremendous single-digit growth penetration

QX, to trends coming We to are by the expected. driven in see pleased in Europe strength growth return with than better

within now our from double-digit in low it's improvement based and stronger on outlook has previous And growth of low The guided digits. we single expect the up Asia, improved, but still we're the seeing previously trends range mid-single-digit growth guide. in

last lapping the promotional the first chain supply year, half record better. continue the to considerably quarter, in and mentioned be disruptions and including of tale prices expect HX of to we I number As weaker impacting are progressively a 'XX factors half stronger a given halves, with two we levels, COGS getting second cotton

I the year. QX provide on will and color full now

growth high given digits, over relative in are now low associated is delivery in SG&A will the but half and in improve in excess margin the impact an ERP digits quarter, second full guide U.S. to downtime QX, to our mid-single to in the of gross a we what For but we down QX a is to our expect the digits to temper ability QX revenues meaningfully and In year slightly in not reported DTC, first QX product expect will last in contribution from down we single or be versus we as will contemplated our have implementation double of year. to that a year's be higher expected have QX up to ago. limited. result continue ship

anticipated, approximately levels of basis half the given now margin to year, year that full XX teens. We year full down the promotion improve the as mid-teens gross year's confident remain we versus to versus to headwinds higher moderate. expect be our we gross than prior expect XX.X%. of prior margin to will be low full respect sequentially expectations tax mid- now rate In points to high we second And previously

key three I'd points. like Prior to make to Q&A,

are our are our while our serves First, in through a international profitable momentum broad-based gives all our returned well our our and growth continuing line in fueling that we face as working. Europe's performance confidence sustaining strategies performance strength expect QX momentum growth. the direct-to-consumer to proof business as brand the challenges strengthening of year, to point and top as us

DTC as progressively through invest way as XX%. and long-term end focus margins in expect by e-commerce. gross And our will margin sales controlling above we continuing gross headwinds accelerate reducing to growing spending abate new Two, with year and to and the move we will we continue doors, year three, the improve growth to to of on goal open while controllables the our on XX% we comp discretionary

open now for call go and the I'll ahead Q&A. With that,

The you. comes Drbul the now Thank Instructions] of questions. is Bob first for Our [Operator from line of open floor question Guggenheim.

could I on margins guess off just start a little the inventories call. I and focus if to gross

inventory, the side, QX margins it expectations, about your on inventory the about versus levels the in the can XX up partner then just you you mean, tying the I where together margin gross with activities plan? the ended wholesale the you your can versus your assumptions gross U.S.? side, promotional around you On specifically in talk talk inventory think at specifically And up Where are U.S. levels?

You asked ask. the question you'd thought that we

So made dollar down meaningfully my unit in inventory, on progress prepared as improving. is meaningful remarks sequentially Overall, let's we I in start mentioned with it. terms both is and

when recall, said happening. we If continues that clean. We the peak I reported QX. it the mentioned, that's which we and you is And improvement inventory largely QX could that by is better, as gets into sequential is do believe what

did of inventory. rid could, a It unequivocally. a this that to example, fact for I by is driven the that extent We in U.S.? clear by the XX% U.S., down were at year-over-year margins, to and did about, but and XX% driven the margins is we correct inventory while, U.S., of able question buys think QX levels inventory Yes, QX were come largely we the is end improvement year-over-year. inventory get up is to to one To we the proactively I'll hurt largely

progressively that improvement gets from why dramatic think perspective. that better the progresses in that's a it's it year So, and we the as U.S.,

year as proactively than we we question one promotion. were great were record for was at ended quarter? as year if our the It into about full year last gross the at look you little Quarter basically, margins. what's gross margin, high to all-time XX.X%. at margins was Gross gross very it the because a not anticipated. year able your margins last read, against levels when gross year in higher We margins will inventory ago a at are is clear promotional To happened there expectation well on largely XX.X% slightly miss

Let's is these prices lot be guys, are the to good took we while, what a guys good a call that of which start I here and the up. fact for going with

We lower channel favorable mix. airfreight are seeing a and

continue what basis see progresses. will XXX that, cotton call So the a basis about it HX was what call transitory, we through of in we or receive that we as increased quantify I all commodity, then And the it's is year. points XXX points year barred. combination

we Our product et costs, HX, was points. to about, XXX, I say, HX high, is would as all-time points barred basis into with HX. XXX in cotton when we we clear cetera, I along demurrage is the inventory that step think that is an some begins That that bought some there XXX because in tailwind about was recede basis but

year year didn't really levels, is time, two higher sell And we the price. this much under pieces. The rest were One, promotion full the which than last anything ago. a

higher something little then selling we're and a Now promotions.

we're and year. continue anticipating conservatively that This the -- anticipating this. expect We but to through is levels typical promotion we're predict,

DTC last you the annual rebounding is be basis going offset of higher. higher International going we're as margin, by on to think better to at relative we is higher. year points mix. So gross levels, the end nicely. Europe and which down channel be the driven be to going year, is expectation expect I think that's promotion about to about largely XX guidance about by

large into helps. core. newness addresses you gross XXXth we're And I XXX I assortment a that's we is of of the how brought so your thinking with that a Bob. our anniversary sell all that question, and think as hope about We piece So, know, what margins. lot

you. Thank

line from comes question Matthew next of Boss JPMorgan. Our of the

Matthew. please, question Your

of So category? brand, it your pricing marketplace to there? maybe, health and consumer the denim the Chip, then, what change update you in strategy as the relates point And just dynamic U.S. the the today given could you're just Harmit, backdrop out maybe in on us any before, Levi's to seeing Europe

Sure.

since you that in sort get expect data still rest the we basis talk all the get your a on basis. the quarter had prior So the know business. category of is the as don't we major up back is would recent We I quarterly think the quarter X%. let our of most growth world first of that on question. of category part of that's only, part to year a XX%. the on up quarterly top me U.S. again And thought But is in a That's a quarter of

last growth of mid-single-digit pandemic, in spike So we about the we of coming how to kind softness. And if talked call, quarters and saw had you denim. back that's in remember the then of We're a we out two big good. now,

reported what our growth with compare that in up double record digits. low X% was DTC That to the we category business that volume in U.S.

prepared are we So talked it remarks. about We share. the gaining clearly in

now leader we share outright denim point old closing past XX-year gap. gaining and months women's are one value grow in to XX- after the months market of to We the and bottoms, in three jeans past in share XX continue men's and women's the

are momentum entire now to this the others on have the That not company. U.S. number XX.X in we struggling. at while are door continue being brand And my the years has happened one in knocking We

how the brand show with It of overall I just is guess business control of equity, we our results. thing we things, terms a to business up. in the where and of the the couple would brand up first DTC shows consumer of the are In and we in point strength engage I how

record positively global quarter. prior up all a in Our comped regions. DTC were We We business XX% year. versus delivered

e-commerce was up digits, Our too. business double

think -- still to this I of kind to that consumers are coming speaks brand.

right? we in but is price I prepared period. in is Levi's do quarter and a navigate AURs don't for, said this perception, result more again it Levi's, through were paying leader But we longevity, a for point a of and pretty quality do studies we positioned perception as inflationary our we're get worth continue environment. our think mid-single data And around brand remarks, despite globe, digits for price other equity promotional that, jeans the And the being to one this and as to the as up well we -- this

On specifically, up were revenues X%. Europe, Europe

think South excluding Russia. improving quarter, which DTC, X%, in prepared the the again, we by versus up Russia, was were a and market the in I smaller outlet said were the They up excluding with Comps mainline positive every North Europe. remarks of couple XX%, and last as of month this stores in as sequentially Europe Every Nordics. also of positive the driven that strength well e-commerce. exception across in quarter grew markets in the

all U.K., single low markets, Italy largest France, digits. were digits. Our up Germany, up were collectively Spain and double

to Europe bit our there. better is about we than what but do I of we're about little -- wholesale the going business it what going guided the Europe, would it's in we last cautious the guess originally. thing like I the year range still thought and just of pretty U.S., So a into kind was doing say

the all playing budgets given are uncertainty. open-to-buy pretty of retailers As their their to close macroeconomic best

Matt, your taking today's strategy, No, pricing But not not necessarily environment. And question behind in change question the is the that's pricing if are we're prices we down? up what's in question happening. about any

most we're promoting in one not number We're so, retailers. like And promotions. smartly, necessarily

newness lot our but in And not we're we've assortment. necessary are We a of competitive, got one.

in we thoughtfully. generally world being on price how -- of consumer fact cetera, overall, that are why we're that for But bring that's so, especially in, And can stuff the price, western example, just where attracting the the the spending. we tight are a traffic, et we part the of mindful organic we

you. Thank

line of of Our next Please Sole Jay. Jay from question go comes the UBS. ahead,

what to you guidance. I'm SG&A do in up that digits dollars expect bit you say -- sure operating how possible QX. the dollars could Harmit, to SG&A us, expand that and I it little your please? not for full caught a expect you for Is on just year I mid-single heard be you impacts margin

can wherever would largely, we I low Jay, to about we year expenses, on mid-single we way SG&A, Yes. thinking are are. full is the cut basis. a discretionary say single- And

et is tightened really have and tightened hires, business We new have cetera, travel, cetera. this things critical, we et like

new doors business, on is think fuel as the XX important. this we're year we'll I spending our dollars is which where between doors, that to is net we have the and three basis, direct-to-consumer brands open going a

U.S. Advertising a long on the basic we're the with the as well like that especially gearing little as bit, being XXX speak infrastructure, term. distribution ERP, implemented the we capacity up the is and as for campaign which in

So, I which where little those the of are think where the drives tighten. we'll areas but is, the tighten SG&A, to bit can spending we continue a

you. Thank

question me. next -- one Our Pardon moment.

Ike Our comes question from Boruchow line of of the Fargo. next Wells

Ike. please, question Your

a it Maybe the what that about the down the any then the had can books the Harmit, And other whether low on maybe planned of the great. quarter? you in Just would U.S. planned embedded on high could were single specifically, wholesale double, U.S. XQ? forward out can or you in pulled wholesale, the is will to decline talk U.S. give that specifically, be Maybe in into half, also more little it's order bit the implications us color first ERP back quarter quantify wholesale? has you that dollars second and pulled dollars be

work our customers as QX. of because we would QX about and QX on we between when range sales implemented. they work and we anticipated key want through our million timing ago, Ike, were about we $XXX Sure. I of the QX $XXX thank had in with Yes. is were talking the being the I the wonderful the I the timing a were the be ERP to us and between $XX do and to -- timing million push call, of quarter ERP currently think mentioned to having as about the discussions million think just is customers able the we getting this with

we in for DCs, over. cutting shut process are our are the we So example, speak, and as of

QX, about what piece a question take it QX. million pull is large your to of $XXX think the I actually we in QX and from

digit, impacted be what saw we're think not also double low high we in QX margin. expect will why gross obviously positive QX, QX. we're why single saying you to as with margins that. guiding what gross will in a on impact That's And So little bit, a about has that that's be digit, down down

think ramp-up is about because thinking largely HX quarter. that's it. be the expect how of So, I ERP the May, the last month really in we're of which to the We the do in happens impact

our three, that's by is benefits we we this simplification insight as behind the and time data get implemented going I being are the the be the so module largely U.S., in Canada in and implemented in we And you into us. and and have a quarter have ERP And largely Mexico should operators. standardized markets actually to know, that's seeing grow gives to foundational benefit very think lot That's the what e-commerce grow in And and better. accelerate we a connect that our especially us the this is else everything doing, see. business, we we direct-to-consumer and and to and we're for automation foundational the with consumer the it we're as two base

Thank you.

of of from Group. question next Our the line Dana Telsey comes Telsey

Dana. please question Your

versus apparel a you expand do you expect about difference you've just progress the you're How versus of or see did order there? department the the what in in you discounters can out given denim? the to upon seeing the And performance what there is through Chip, year? non-denim, you wholesale? And that rates? and between with stores how that seeing there? what you category, denim are performed the think What overall As And past

a Yes, lot there. there's

So first This the of give normally for didn't and me. again apparel number you're is I've here got data front all, category, but time, this in up X%. I Apparel was I U.S. of do the QX. right,

with X%, was of the base but and hearing the ahead slightly period of seeing our have Apparel of of in and I apparel, it even denim, was the a that denim don't bit XX. business. better. that Recall, I was dressier We're seeing up plus doing that's consistent that own what little category up is we're total X% for off base is some up said everything categories more a

those really, like well. in question? items pretty really seeing We're as best-selling our was done has moved up and cargoes business else was non-denim and double categories on now digits It of What right things well. the well Our are it chinos that. some low

Yes.

Dana, wholesale. think, about expectations I for you asked So our

As clarify, U.S. wholesale year you important. and we're is just or lapping the to I the know, if think you of business want

half, in XX% over XX% the close first in think little U.S. The business QX. wholesale a XX%, up QX, I was

are we have we numbers, ERP and then timing. lapping the so And strong

is business. expectation our digits, for for the to mid-single expectation in our year direct-to-consumer low is wholesale this year by up Our but down and in made the total, the

to So, continues business is structurally, to said business, about This going think of that that's the is is head it's for our close Investor think get to And Levi's, you XX%. we strategically, stronger. business in I should what which this towards but really XX%, XX% if direct-to-consumer a Day. --

margins better, cetera. gross the et stronger, are gets it So

it's it's 'XX is I -- So, the in we're Company unfortunate a And a happening at end structurally what's of emerges year, terms thing. in of taking reset better think a if good the the the perspective. good from world that here macroeconomics. Western the But company

add in would talking of tight. customers, I our thing is other all pretty open-to-buy with only on their virtually the are The customers Dana, top wholesale keeping of budgets Yes. that,

add the in Denizen other would then I only pretty are we Signature and uncertainty significant thing that business. is softness seeing the Given our

being consumer really that So squeezed. value is

DTC driving Levi's where the is our the denim. our the happening seeing the trading buying strength -- well or that business, bifurcation the hard still are end of of amount, There's making the just definitely that business that brand consumer not and -- sweet in middle-income choices is the is kind consumer Levi's either which denim, of for spot growth business. doing is and and and is down And lower buying a growth but direct-to-consumer we

Thank you.

of the of question Lejuez line next Citi. from Paul comes Our

Paul. please, question Your

filling or I about Kogan in you I you're if talk you if expecting books to I heard and Tracy you confidence order and there, for Paul. anything was in don't think give like XQ, growth growth? high have It's single-digit sales just wondering, that still support

But do Yes. if No. than know, HX higher our you the math, talk the digits. year. guide connect. Tracy, mid-single as quarterly. to good We you up is about don't, We

the algorithm. our low growth approach in end we'll close so And HX, probably of

that Plus It's cetera. the first really bringing if a And the 'XX, we're say, are half the et What we're by the But able you to It's as that it we've benchmark just expectation of tale year back lapping. year to, things the the earlier second half also two and weaker, out not inventory we're and first the progresses, better little stronger. half lapping. our driven between the this. difference so, the go second said halves, and half et progress is is we get all is dramatic. year a to cetera, work issues,

you freight, a freight ocean Great. a of And guess out think a airfreight this just headwind. as said year? wondering those how it the thinking was on tailwind, I was of just quarter. about I netted for remainder headwind the freight you're I'm but pieces

we're and tailwind, I becomes thinking pieces a it. mean, through both how freight, of that's HX

you. Thank

next question BNP Vasilescu Paribas. the from line comes of of Our Laurent

Your question please, Laurent.

square some Harmit, want away I just to here. math

just that with remarks, wholesale be percentage for the high confirm how mentioned math, quarter, that points digits? should think off mid-XX% think wholesale? be was your decline the down high that that year. coming the I I down but prepared might of would sales curious, is single wanted if U.S. then global last you maybe case, from down just that's the further, teens. imply DTC about of mentioned overall you much mass Does in I to And and of drilling the be

and of about curious Just the you're how full thinking know how for to performed year? you're this how thinking it it quarter

Yes.

Levi's. largely mid-XXs the is So

XX% And year. of little the end the you better about of than But we think Beyond If the business if Yoga, That's the of has of business. the at you are DTC. it's think is Company the the XX% Dockers half projection. a would Company,

is the down roll And really direct-to-consumer math, numbers So driving see open our things digit you'll we focused business. U.S. into obviously, from are where, expectations that wholesale mentioned, our on to run If the into and as global view mid-single and if largely low in and do is the you in Chip the the Europe, our is cautious customers buy. that our perspective. change, that building

the Very you're mass quarter this how channel, how thinking helpful. And the any and about performed year? it for color on

Yes.

help mass and down customers, it we're Denizen growth down down. And four largely quarter XXXX. they're again, the planning double cautious and Red taking in we them in XX% Tab The Signature news the with digits. It the denims XX%. grow quarter sell was And We're the good to reinforcing. really out we're low XX%. we buy. channel in doors So and are to lapping women's that out for planning And about working a it open brand. and of women's us our was was of wonderful is Levi's to and customers, premiumize down two does one -- And

Thank you.

Please Roach Our of Brooke go Goldman from of next question Sachs. Brooke. line comes ahead, the

U.S. core trends was for differing wholesale expectations this if to Tab in business be you a DTC? America has you And in the talk view buy? versus relative is outlook? wholesale cautious that brand you're be Or with trends your consumer wondering may stronger to sell-through engagement how open a North Harmit, trends and prior more clarify, slowdown a function then in I that there cautious sell-through the more seeing can the on could wholesale of been you're seeing driving at to may Red that the the

Yes.

month of all you as the very is, weather. because March a checks, it's to refund read know, tax So difficult

think seen for a it's so, things and early example, April, lot traffic but back better. we've days, as And come quarter about I we think looking the are

a the To view your our direct-to-consumer buy on decision. is doing that we're is the representation question cautious that up largely showing open be business, is question To wholesale -- about real brand is our and about driving well. your in of how assortment which that's thinking to

promotional better, opens up, improve get that over time, probably, also tighten inventories the environment. and if will So should that things as

Thank you.

Stanley. Straton of Our next question comes from the Morgan line of Alex

Alex. Your question please,

couple on end. Just my a

to the back environment. year-over-year brands are change line the promos a and year with previously in environment are just totally prior quarter communicated? that half. I the broader entering you sequentially the understand And inventory wondering characterize in want that how But think there? the on compared sales I forward understand clean change growth have longer to the secondly, higher saying First, by I would I'm how in than maybe the time I given promos is be latest they'll may line think quickly. if you most of end then

I'm on So what's here? just wondering Levi different

ago, I about mean, inventory is, out this growth We'll to quarter high We quarter teens, ago relative mid- view is. we clean? clean Yes. Alex, think, clean. the the Yes. is quarter wholesale to inventory It's were a be a going we be on U.S. is is anticipated higher given about we question by clean rate two. a not ago. today what where than we're to than our year slightly view just Is quarter our a

inventory and you as to sales from know, the levels is inventory our U.S., But largely on so in that's for thinking that getting guiding back perspective.

promotional the environment, In cautious to it's predict. difficult just terms of we've been

And in gross we HX. in promotion level so a our margins, higher built latest slightly of expectation in have

doesn't but that really that's gross higher into Now, that translates out, expectations. obviously, into in factored pan margins, if

keep second issues in mind year, would all The didn't have half. a other even chain the half, pretty and products. were changed I dramatically there supply first people first between is lot thing add and only half promotional Last that base enough period the environment of

to price. started sold And full it then being was half, lot second more at a promotional. everything the So get

the change gross So an the half is much on first quite should the dramatic us. of The year-over-year impact dramatic in less year-over-year the and be half second overall in for less change margin. have

you're if gross the think margin. I Alex, to progression understand, trying of

year, of HX. making XXX as we into is Chip XX.X. QX year got better is step year, really promotional that commodities, last gets XX.X ended was XX So progressed. at to was because This QX the it which as the point

gets progression But So it's QX. view. we as building we but slightly gross over there going going some close the in be HX, better. bad environment be we're XX% promotions us It's not back that's to not as I is promotional why in margin promotional to as the QX and year, as think getting think in plus to

you. Thank

line the of Our next question of of comes Nardone Chris from America. Bank

Your question Chris. please,

half? second quick last question momentum On then that environment promotional DTC about can And a just Two lower your on strong in Asia. the compared to second half talk questions. on maintaining potentially a guidance, you quick confidence

year. You much how new there strength where coming can doors low top Is elaborate up guidance of is increased any growth digits, way Asia most and that's you on seeing from percent the and comps? your mid-XXs in last you're versus double on

Yes. Yes. Thanks, Chris.

Asia.

And of As noise two COVID some cetera. know, country strategic and et years, been is has initiatives. last growing our the Asia one just et cetera, you the close,

are quarter in the QX Asia of good in happened February. China reopening that read But I to India, leverage And now. as whether South other operating it's reflect our a doesn't well it's whether perspective. in most because QX margin from the Australia, markets So start. off as We countries. good that Asian had it's from is you can great think operating that whether a perspective a largely dollars, see

continue -- driven The what business factored strong the comp the the brand direct-to-consumer which really largely business is performance, upside news. rest good for is or year. largely the we DTC in is of sustain and is by growth see a itself sales in or is haven't should China And any we the --

that's So Asia story. the

because another brand I question, a strong. itself ONE, had sustains It's all a the think so is Consumer's we resilient. more think year strong yes, Asia younger that consumer helps. lot the really as Chris. You progresses the, with DTC, One

down. rebound. The To your be down. in a the is DTC DTC, last continue the have to stronger view Europe, lot did point largely And seen while QX anticipated. tight was Europe continue. QX see customers Europe was we on than open And consumer we growth the in year on DTC everybody down slow our to and wholesale half, buy, second

we I optimize that, a there things on emphasis definitely because more we have as Michelle to retail a those is continue Officer, a is will our improving performance And ground putting other do is will to operators our the new think improve. benefit lot execution, see do us clear the The and but we I focus job, to think continue driving Digital as Chief on fruit performance we continue and piece on low-hanging DTC and great opportunities.

like time, over the Company to Thank turn closing back any I'd to you. call this for the At remarks.

the everyone talking thank we'll look Thank I to in to and next and at want quarter. dialing and Latif, the questions, you with for you, end forward of for your

Thanks weekend. nice very a much. Have

today's Thank disconnect conference call. you. concludes at Please this lines your time. This