Levi's CFO on state of retail: People are being cautious

Levi Strauss & Co. (LEVI) faced concerned investors on the back of its first quarter earnings report, with elevated inventory still being a struggle for the retailer. Levi Strauss & Co. CFO & Chief Growth Officer Harmit Singh joined Yahoo Finance Live to discuss what's to come for the company.

"Our wholesale customers are tightening their 'open-to-buy' budget, however they have a lot of time and a lot of space for brands that work," he says.

"Consumers who are in the U.S. who are earning less than $50,000; they're pressured," he adds, but reiterates that this category is a "small piece" of the retailer's business.

"We went into the year thinking that it would be a tale of two halves; the first half being weaker...and the second half a lot stronger," he explains. "People are generally being cautious and that's reflective in our wholesale business," he adds.

We'll get a pulse check on the consumer later this week, with March retail sales on tap Friday.

You can watch Brad Smith, Julie Hyman and Brian Sozzi's full interview with Harmit Singh here.

Key Video Moments:

00:00:14 - Customers tightening budget

00:01:15 - Tale of two halves

00:02:04 - People are being more cautious

Video Transcript

BRIAN SOZZI: Just given everything we have been seeing in the economy-- a little bit of an economic slowdown here, a soft patch ahead of the spring-- what is the appetite among major retailers to put through replacement orders?

HARMIT SINGH: Our wholesale customers are tightening their open-to-buy budget. However, they have a lot of time and a lot of space for brands that work. And our brand is working, especially brands that provide innovation and newness. And with 150th anniversary of the 501, you've got new products in. We are also rolling out nondenim product.

So I think newness, as well as working with brands that consumers trust. And, as we are seeing, our consumer base, clearly the value consumer, consumers in the US who are earning less than $50,000, they're pressured. But that's a small piece of our business. Our target base is $50,000 to $150,000, folks who earn that much in the US. And that group is resonating well with our products.

We went into the year thinking is going to be a tale of two halves, the first half being weaker, largely because of the year overlapping a period that was very-- had very little promotion. And our cost of goods was much lower. And the second half we were a lot stronger.

It's kind of panning out that way, plus a tale of two worlds, the Western world a little bit under pressure, the Eastern world, which is Asia, as well as our Latin American business being a lot stronger. Actually, as we end the quarter, our European consumer is generally a lot stronger than everybody anticipated and showing in our European business.

And in the US, I talked about the bifurcation between the value-end consumer and the consumers that are largely our target markets. So as long as you bring newness and your products are resonating, I think our retailers are more open to place orders. But people are generally being cautious. And that's reflected in our wholesale business that we, A, reported, as well as indicated of projected for the year.