Levi Strauss awaits 2021-end for pandemic recovery, cuts inventories

Iconic denim clothing-maker Levi Strauss & Co. reported a 12% year-over-year decline in revenue for the fourth quarter ended Nov. 29, 2020. While that was a slower rate of decline than the prior quarter, it had been flattered by an extra trading week and the Black Friday sales event, which together added 3 percentage points to growth.

The company's sales have been hurt by store closures, in common with most other apparel retailers, as outlined in Panjiva's Jan. 18 research, with recovery likely to take a few quarters yet. Indeed, the company has stated that if "conditions do not worsen, [it will] return the company to pre-pandemic revenues by the end of 2021 [though there] remains the possibility of additional COVID-19 related inventory and other charges."

With regards to inventory, Levi's cut back inventories by 8% year over year "reflecting the company’s ongoing inventory actions in response to the COVID-19 business disruption and flexibility resulting from the high percentage of sales derived from core products."

That control can be seen in the company's supply chain activity, with total U.S. seaborne imports linked to the company having declined by 14.8% year over year in the fourth quarter of 2020, Panjiva's data shows, though the rate of contraction slowed to 4.6% in December. The latter included a 7.3% year-over-year expansion in imports of denim jeans and a 39.8% surge while shipments of shirts/T-shirts dipped 2.2%.

Levi's imports did slightly worse than total U.S. seaborne imports of denim, which declined by 9.8% in the fourth quarter of 2020 and actually saw an accelerating decline of 13.7% in December. PVH Corp., owner of the Calvin Klein and Tommy Hilfiger brands, experienced a 35.9% surge in supply chain activity in the fourth quarter of 2020, though shipments in December were unchanged from a year earlier. Shipments of denim products linked to H & M Hennes & Mauritz AB (publ), meanwhile, dropped by 39.7% year over year in the fourth quarter of 2020 after rising 5.3% in third quarter, potentially reflecting style decisions rather than supply chain issues.

Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.