1. What exactly is Levi Strauss trying to accomplish?

2. Should other companies (give examples) feel threatened? Why and Why not?

Levi Strauss Uses More Frequent Financial Forecasts to Confront Uncertainty

The denim company is submitting half-year financial goals to its board instead of annual ones.

Levi Strauss & Co. is adjusting its financial targets more frequently, setting them every six months instead of annually as it faces an uncertain economic outlook.

The San Francisco-based denim maker switched to a six-month financial planning cycle last year after pandemic-driven changes to the economy demonstrated a need for midyear updates, according to Chief Financial Officer Harmit Singh. The companys half-year plan includes forecasts for revenue and profit, as well as cash conversion, showing the speed at which a business sells inventory or collects payments.

The more frequent forecasting cadence is helping Levi Strauss prepare for a potential economic slowdown, new phases of the pandemic and any unforeseen geopolitical events, Mr. Singh said. The reason its important is because you dont have a real line of sight in the future. Things are so uncertain, he said, adding that he intends to submit his plan for the second half of the year this week.

Levi Strauss last week said revenue during the quarter ended May 29 increased 15%, to $1.47 billion. Demand for denim has been strong as people return to work in more casual clothing and replenish their wardrobes with newer styles, Mr. Singh said. The company last month set a five-year financial goal of achieving annual net revenue growth of between 6% and 8% through fiscal 2027.

Net income during the quarter fell 23% from a year earlier, to $49.7 million, due in part to a $60 million charge stemming from the temporary suspension of operations in Russia. Levi is working through its long-term plans for its Russian operations, and expects more clarity on the matter in the next couple of months, Mr. Singh said.

Demand for Levis lowest-priced denim declined during the quarter, as some inflation-weary consumers pulled back on spending, analysts said. Demand for the companys Denizen and Signature productswhich sell for between $20 and $30 at retailers including Walmart Inc. and Target Corp.declined by the mid-single digits from a year earlier, Levis said. Those two brands accounted for 8% of the companys net revenue in the 2021 fiscal year.

Outside of its lowest-priced categories, however, Levi isnt seeing signs of a pullback in spending, Mr. Singh said. The state of the consumer continues to be strong, he said.

Levi has raised prices to offset the impact of higher costs, including for cotton which is used to make denim. Higher sale prices so far havent dented demand, Mr. Singh said.

During the quarter, inventoriesa focus in the industry as retailers grapple with excess stockincreased 29% to $1.1 billion. Approximately two-thirds of Levis inventory is made up of core products that arent tied to a particular season, the company said. The companys acquisition of athleisure wear brand Beyond Yoga in 2021, as well as the purchase of operations in Thailand that were previously licensed, also bolstered inventory levels.

Analysts said the companys inventory levels, while rising, are doing so in line with expectations for strong demand. Women are buying more wider-leg jeans instead of skinny-leg styles, and the companys classic 501 jeans category is showing strong growth, analysts and the company said.

In the months ahead, a new enterprise resource planning system will likely provide Levi with better visibility into where its inventory is located and how well stores are stocked, said Jay Sole, an analyst with UBS Group AG.

Approximately 20% of the companys inventory is in transit, meaning it hasnt arrived at its facilities yet. If its on its way, its against future orders and future seasons, Mr. Singh said.