Levi's 'balloon jeans' emerge as the post pandemic hot style

Brian Sozzi

The post-pandemic wardrobe for men and women appears to be looser fitting jeans with wide legs as folks adjust out of comfy joggers, with a few extra pounds on their frames.

"What we are seeing is as people turn back to denim, we are seeing people buying baggier fits. Sometime in 2020, we came up with the balloon jean, and we have seen people becoming a lot more casual," said Levi's CFO Harmit Singh on Yahoo Finance Live. "Forty percent of our women's business in quarter one was looser fit. And the men's business is up dramatically."

Those balloon jeans did their part to power Levi's to a better than expected first quarter.

FILE- This Feb. 9, 2018 photo shows Levi's jeans hanging on a wall at Levi's innovation lab in San Francisco. On Thursday, March 21, 2019, Levi Strauss & Co. is going back to the public markets after 34 years. (AP Photo/Jeff Chiu, File)
Levi's jeans hanging on a wall at Levi's innovation lab in San Francisco. (AP Photo/Jeff Chiu, File) (ASSOCIATED PRESS)

While sales fell 13% from a year ago as the pandemic continued to hurt store traffic, Levi's gross margins rose a solid 250 basis points from a year ago. Global digital sales rose 41% year-over-year.

Here is how Levi's performed compared with Wall Street estimates on its earnings day Thursday evening:

  • Net Sales: $1.31 billion vs. $1.25 billion

  • Diluted EPS: 34 vs. 25 cents a share

  • First Half 2021 Outlook: Sales up 24% to 25% and adjusted earnings of 41 cents to 42 cents, which suggests earnings of 7 cents to 8 cents in the second quarter. Wall Street had been banking on earnings of 5 cents a share for the second quarter.

Levi's shares rose 2.5% on Friday amid the upbeat outlook.

Singh thinks the world is entering a new denim cycle as lives begin to change following vaccinations. That has Wall Street staying mostly bullish on Levi's shares this year.

"We believe the organic health of Levi's business is getting better overall as we emerge from the COVID-19 pandemic, with the company seeing improving wholesale trends as well as increased denim demand as the world re-opens. We are encouraged by the company's offensive strategy, strong brand, experienced management team, and healthy financial position," said Guggenheim retail analyst Robert Drbul in a post earnings research note. Drbul rates Levi's shares at a Buy with a $29 price target, or 12% above current price levels.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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