Market commentary by eToro analyst for Romania, Bogdan Maioreanu
When buying a pair of jeans, when washing them, when drying them, one would not believe that it adds to global warming. Every time you buy a new pair of jeans, it’s like turning on your shower and letting the water run down the drain for 21 hours. And each year there are more than two billion pairs being bought worldwide.
It was not like this 170 years ago. Denim comes from the French town Nimes from where, in the 1850’s, the fabric was exported to the United States, hence the name “de Nimes”. It was seen as a sturdy fabric for miners but Jacob Davis and Levi Strauss saw more. In 1873 they invented jeans. Despite using denim, jeans are named after the city of Genoa in Italy, a place which manufactured a similar cotton corduroy, called either jean or jeane.
Today, Levi’s (LEVI) is the number one brand globally in jeanswear (measured by total retail sales). In 2019, the brand had worldwide net sales of more than 5.7 billion USD. The pandemic brought their number to USD 4.45 billions but the company is on the path to return to over 5 Billion this year. Last night, the company posted its financial results for Q3 2021. Levi’s increased its net revenues with 41% compared to Q3 2020 and 3% compared with the pre-pandemic similar quarter of 2019. And diluted earnings per share (EPS) were 0.47 USD versus 0.07 last year.
These good results are also due to one of the most important actions that Levi’s took before the pandemic. The company dispersed its production facilities out of China in 24 countries and, unlike Nike (NKE), are now having a more limited impact from the supply chain crisis. The company is confident about the future, authorised 200 million USD repurchase of shares and raised the end of year outlook.
Jeans production comes with a lot of environmental challenges. “Cotton is just a very thirsty plant,” says Katrin Ley, managing director of Fashion for Good, an organization working to make fashion more sustainable. Growing the plant alone accounts for 68 percent of denim’s total water footprint, she adds. And the issues are not finishing here. Because fashion now demands a softer, worn-like, vintage denim fabric, this is achieved by using chemicals on the raw fabric. According to Mostafiz Uddin, CEO of Bangladesh Denim Expo, “it’s not just the large quantity of water used — the fading process in denims also consume chemicals which are harmful for the workers and also the environment.” According to a Levi’s (LEVI) survey, the lifetime of each pair of jeans can equate to 33.4 kg CO2 and more than 3700 liters of water. Most of this consumption, 77%, is made during the production phase.
But brands are starting to take measures against the environmental issues their product is generating. AG Jeans, a specialized jeans company, launched this year a collection featuring 100% biodegradable jeans, made from organic cotton, and blended with hemp – a high-yield crop that produces significantly more fiber per acre than cotton and has a lower CO2 impact. Prada also used organic cotton for this year’s jeans collection. Companies have started using lasers instead of chemicals to age and distress the fabric. Re/Done is launching a second-hand marketplace where customers can buy and sell their jeans, T-shirts, blazers, and more, in an effort to curb waste and move toward a circular model of increased lifespan of the product.
Levi’s is leading the industry with their plan to 90% reduced emissions by 2025. In a report published at the end of September, the company shows that it is well on track to achieve its targets. It has already reduced by 55% the greenhouse gases emissions and it is using 76% of its electricity from renewable sources. Levi’s is imposing the same high standard across its supply chain.
However, 21% of the total water consumption in the lifetime of a pair of jeans is due to their use. A recent report from the Society of Chemical Industry suggested that many people wash their clothes too often or almost every day using washing machines, which is having a huge environmental impact. The report states that jeans should be washed only once a month and not more than that. An initiative that, at least here, in Romania, with the increasing prices of electricity might gain traction.
Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.
eToro is a multi-asset investment platform that empowers people to grow their knowledge and wealth as part of a global community of successful investors. eToro was founded in 2007 with the vision of opening up the global markets so that everyone can trade and invest in a simple and transparent way. Today, eToro is a global community of more than 23 million registered users who share their investment strategies; and anyone can follow the approaches of those who have been the most successful. Due to the simplicity of the platform users can easily buy, hold and sell assets, monitor their portfolio in real time, and transact whenever they want.