Sales of Levi’s denim skirts double as Western fashion takes over

“Denim on denim, denim on denim,” Beyoncé sings in the lyrics of her latest album.

Levi Strauss Shoppers are taking that advice to heart, and executives at Levi Strauss are ecstatic.

Western wear is booming as consumers increasingly favor a top-to-bottom denim look, the 171-year-old clothing maker said Wednesday. As the style gains cultural acceptance, its popularity is seeping into denim niches like shirts, skirts and dresses outside of Levi’s well-known blue jeans lineup.

“The popularity of western wear is at an all-time high,” Chief Executive Officer Michelle Gass told analysts Wednesday night after the California-based retailer reported its latest May-quarter earnings.

A Western renaissance has been gaining momentum over the past few months, with fashionable shoppers seeking out items like jeans, boots and cowboy hats. Levi’s scored a major hit when its jeans brand was featured in Beyoncé’s song “Levii’s Jeans” released earlier this year.

In addition to Beyonce’s hit album “Cowboy Carter,” the popularity of the Western style was also due to Louis Vuitton Taylor Swift’s Eras tour earlier this year and is currently ongoing.

Gass became CEO of Levi Strauss earlier this year, but previously served as CEO of Colestouts denim gaining prominence in the public imagination and western wear becoming more prevalent across the culture.

More specific data released on the company’s earnings call on Wednesday showed how Levi Strauss is capitalizing on demand for denim beyond its popular 501 jeans. Sales of denim skirts, jumpsuits and dresses all at least doubled in the most recent quarter, Mr. Gass said. Sales of western shirts have also grown significantly, especially for women, he said.

Levi’s has enjoyed success with what its 55-year-old chief executive describes as a new strategy to get customers dressed head-to-toe in denim.

“Our new focus is, of course, to continue to carry jeans, but to carry denim from end to end,” Gass told CNBC’s “Mad Money” late Wednesday. The denim skirt and dress category hasn’t been a big one historically for the company, but it’s now “exploding,” he said.

To be sure, the well-known denim boom alone isn’t necessarily impressing Wall Street: Levi Strauss & Co. fell more than 15% on Thursday after its latest numbers, its second-worst day since its initial public offering in early 2019.

Levi Strauss & Co. reported second-quarter sales of $1.44 billion, slightly below the $1.45 billion consensus estimate of analysts surveyed by LSEG, despite the denim boom. The company’s financial chief told CNBC the sales shortfall was due to unfavorable foreign exchange rates and weakness in the Dockers brand.

Meanwhile, Levi Strauss & Co. earned 16 cents a share excluding items, beating analysts’ average estimate of 11 cents.

The stock had been rallying for the year through Wednesday amid talk of a resurgence in cotton fabrics and Western clothing. Even after Thursday’s drop, the stock is still up more than 18% this year. By comparison, Contour BrandThe company, which owns denim brands Wrangler and Lee, is up 5% since the beginning of the year.

Wells Fargo analyst Ike Borchow said Levi’s second-quarter report “simply fell short” for “one of the hottest buys in the space right now.” In other words, the company certainly didn’t meet its lofty standards, he said.

Meanwhile, Citigroup analyst Paul Lejuez said Levi’s had a strong quarterly performance, but cited concerns about the performance of its wholesale business and the possibility of weak sales in Europe remaining in the second half of the year.

Lejuez pointed to several tailwinds as reasons for optimism for the stock. The two factors he cited as fueling excitement — new styles and fits — are common for clothing manufacturers.

Lejuez’s final nomination was a lot more unique: Beyoncé.

—CNBC’s Gabriel Fonrouge and Julie Coleman contributed to this report