The western wear craze means sales of Levi’s denim skirts have doubled

In a lyric on her latest album, Beyoncé sings “jeans on jeans, on jeans, on jeans.”

Levi Strauss buyers are taking this advice to heart. Levi Strauss executives are ecstatic.

Western wear is booming as consumers opt for top-down denim looks, the iconic 171-year-old clothing maker said on Wednesday. As the style gains cultural favor, its popularity is softening denim niches — like shirts, skirts and dresses — that fall outside of Levi’s popular blue denim offerings.

“The growing popularity of western wear is at an all-time high,” CEO Michelle Gass told analysts Wednesday night after the California retailer’s latest earnings report for the quarter ended in May.

A Western renaissance has gained traction over the past few months, sending stylish shoppers looking for pieces like jeans, boots and cowboy hats. Levi’s scored a big hit when its jeans brand was referenced in Beyoncé’s song “Levii’s Jeans,” released earlier this year.

Beyond Beyonce’s chart-topping Cowboy Carter album, the increased prevalence of Western style has also been linked to a fashion line unveiled by Louis Vuitton earlier this year and Taylor Swift’s ongoing Eras tour.

Gass, who took over as CEO of Levi Strauss earlier this year after previously serving as CEO at Kohl’shas stated that denim is having a moment in the popular imagination, with western clothing trending more broadly across culture.

More specific data shared on the company’s earnings call Wednesday showed how Levi Strauss is benefiting from demand for denim beyond its popular “501” jeans. Sales of denim skirts, jumpsuits and dresses all at least doubled in the last quarter, Gass said. Sales of Western shirts have also grown significantly, she said, especially on the women’s side.

Levi’s is finding success in what the 55-year-old chief executive described as a new strategy of trying to dress customers in denim – head to toe.

“Our new focus is, yes, to continue to own denim, but to take that denim from the top down,” Gass said on CNBC’s “Mad Money” late Wednesday. While she noted that the skirts and denim categories have historically not been big for the company, now “they’re exploding,” she said.

To be sure, the well-documented denim craze isn’t just impressing Wall Street. Levi Strauss fell more than 15% on Thursday in response to its latest numbers, its second-worst day since going public in early 2019.

Levi Strauss posted $1.44 billion in revenue in the fiscal second quarter, narrowly missing the $1.45 billion consensus forecast of analysts polled by LSEG, despite the jeans boom. The company’s chief financial officer told CNBC that the loss in sales was caused by unfavorable foreign exchange rates and the weakness of the Dockers brand.

Levi Strauss, on the other hand, earned 16 cents a share, excluding items, ahead of analysts’ average estimate of 11 cents.

In the year to Wednesday, shares had rallied amid buzz around cotton-based fabric and a revival in western wear. After Thursday’s decline, the stock is still up more than 18% on the year. By comparison, the shares of Kontoor brandsparent of jeans brands Wrangler and Lee, are up 5% year-to-date.

Wells Fargo analyst Ike Boruchow said that for “one of the most crowded desires in the space today,” Levi’s second-quarter release “just wasn’t good enough.” In other words, the company lost what was a high bar, he said.

Meanwhile, Citigroup analyst Paul Lejuez thought Levi’s most recent quarter was good, but cited the performance of its wholesale business and the potential for European sales to continue to struggle in the second half of the year as reasons for concern.

Lejuez pointed to some tailwinds as grounds for optimism on the stock. Two of his reasons for driving excitement—new styles and fits—are common for a clothing manufacturer.

Lejuez’s latest was more unique: Beyonce.

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