Consumer brands spent decades relying on department stores and retailers to reach customers. Now many want more control over pricing, data, merchandising, and the shopping experience.
Levi Strauss reports on Wednesday after the close, giving you a fresh test of whether owning more of the customer relationship can create better economics.
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Theme: Direct-to-Consumer Retail, E-Commerce, Owned Stores, Wholesale, Brand Control, and Margins
The Store Is Becoming Part of the Brand
Wholesale offers scale. A brand can put products into thousands of stores without building the entire retail network itself.
The trade-off is control.
The retailer decides where the product sits, what competes beside it, how it is promoted, and which customer data gets shared.
Selling through your own website or store changes that relationship. The brand can control the experience, collect first-party data, launch products directly, and keep more of the selling price.
That does not mean wholesale is bad. Nike recently learned what can happen when a company pulls too far away from retail partners.
The strongest model may be a balance where wholesale creates reach while owned channels deepen the relationship with the most valuable customers.
Levi’s Is Wednesday’s Main Catalyst
Levi Strauss reports fiscal Q3 results Wednesday, with its earnings call at 5:00 p.m. ET.
Its previous quarter showed why this theme matters. Direct-to-consumer revenue increased 11%, including 19% growth in e-commerce, while DTC represented 51% of total revenue. Comparable DTC sales increased 6%.
Wholesale still grew 5%, which may be just as important.
Levi’s is not abandoning retail partners. It is trying to become more direct-to-consumer while continuing to use wholesale for reach. That balance helped Q2 revenue rise 8%, gross margin reach 62.7%, and adjusted EBIT margin improve to 9.0%.
Wednesday should tell us whether the strategy is still working as the company moves further from its traditional identity as simply a jeans supplier.
Direct Does Not Automatically Mean Better
Owned stores and websites can improve gross margin, but they also come with rent, employees, fulfillment costs, marketing expenses, returns, and inventory risk.
That means DTC only creates value if the brand is strong enough to attract customers without overspending to acquire them.
On Holding is showing what the model looks like when demand is strong. Nike provides the cautionary example when channel strategy gets out of balance.
For you, the question is not simply who has the highest percentage of DTC sales. It is who can use direct channels to strengthen the brand without sacrificing profitable wholesale distribution.
The Chain Reaction
Brand builds customer demand → wholesale creates broad distribution → owned stores and e-commerce deepen the relationship → first-party data improves → pricing and merchandising become more controlled → gross margin can rise → excessive DTC expansion increases fixed costs and channel conflict
What to Watch
For Levi’s, watch DTC growth, e-commerce, wholesale, comparable sales, gross margin, Asia, women’s products, Beyond Yoga, and full-year guidance.
The best result would show direct channels continuing to outgrow the business without wholesale deteriorating. That would support the idea that Levi’s can own more of the customer relationship while still benefiting from third-party distribution.
Levi Strauss (LEVI)
What it does: Levi Strauss owns the Levi’s brand along with Beyond Yoga and sells apparel through its own stores and websites, department stores, specialty retailers, and other wholesale partners worldwide.
Why it fits: Levi’s is Wednesday’s direct catalyst and one of the clearest examples of a traditional wholesale brand intentionally becoming more DTC-focused.
The strategy is not simply opening more stores. Levi’s wants greater control over how consumers experience the brand, while expanding beyond men’s denim into women’s apparel, tops, lifestyle products, and Beyond Yoga.
That increases the addressable market and gives Levi’s more products to sell once someone enters its ecosystem.
What stands out: Q2 DTC revenue increased 11%, e-commerce grew 19%, and direct channels represented 51% of company revenue. Wholesale also increased 5%, allowing Levi’s to grow direct without sacrificing outside distribution.
Total revenue rose 8%, adjusted EPS increased 27%, and management raised its full-year outlook.
What to watch: DTC comps, e-commerce, wholesale growth, women’s products, Asia, Beyond Yoga, gross margin, and tariffs.
The Takeaway: Buy this if you want the traditional brand successfully becoming a more direct consumer business. Levi’s still has wholesale reach, but increasingly controls where and how customers buy.
The risk is that higher store and selling expenses eat into the margin benefit of moving direct.
Ralph Lauren (RL)
What it does: Ralph Lauren sells premium apparel, accessories, footwear, home products, and fragrances through owned stores, digital channels, department stores, and wholesale partners.
Why it fits: Ralph Lauren shows how controlling distribution can strengthen pricing power rather than simply generate more sales.
Management has spent years reducing reliance on lower-quality distribution, tightening inventory, raising average selling prices, and presenting the brand more consistently across stores and digital channels.
That matters enormously in premium fashion. A luxury-oriented product becomes less desirable if customers constantly see it discounted.
What stands out: Fiscal Q1 revenue increased 14%, while constant-currency growth reached 13%. Global direct-to-consumer comparable sales increased at a low-double-digit rate, driven by both stores and digital.
Average unit retail increased 15%, one of the clearest signs that customers are accepting higher prices while the company maintains full-price discipline.
Wholesale also accelerated to mid-teens growth, showing that strong DTC does not require cutting off partners.
Management raised its full-year revenue and operating-margin outlook.
What to watch: DTC comps, average unit retail, Asia, North America, full-price selling, wholesale growth, and marketing investment.
The Takeaway: Buy this if you want the premium-brand version of the theme. Ralph Lauren is using tighter distribution and stronger brand positioning to sell fewer discounted products at better economics.
The risk is that premium pricing eventually runs into resistance if affluent consumers become more cautious.
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On Holding (ONON)
What it does: On sells premium running and lifestyle footwear, apparel, and accessories through wholesale partners, e-commerce, and a rapidly expanding network of branded stores.
Why it fits: On is arguably the best example in this group of DTC and wholesale reinforcing each other rather than competing.
Wholesale gives the brand visibility through running shops and major retailers. Owned stores then act as premium brand hubs where On can show more products, control merchandising, and create a deeper connection with customers.
The strategy is particularly valuable as On expands beyond running shoes into apparel and lifestyle products.
What stands out: Q2 sales increased 21.6% in constant currency, while DTC revenue jumped 34.3%. Direct channels reached a record 45.7% of sales.
Gross margin expanded to 65.4%, helped by more DTC sales, operating efficiency, and full-price discipline. Apparel sales increased more than 56% in constant currency, while Asia-Pacific grew nearly 55%.
Management raised its full-year gross-margin outlook to at least 65%.
What to watch: DTC growth, store productivity, wholesale discipline, apparel, Asia, full-price selling, and gross margin.
The Takeaway: Buy this if you want the high-growth brand proving direct channels can improve both customer engagement and profitability while wholesale continues growing.
The risk is that rapid expansion creates inventory or discounting problems if demand eventually slows.
Lululemon Athletica (LULU)
What it does: Lululemon sells athletic and lifestyle apparel primarily through its own stores and digital channels, giving it one of the most direct business models among major apparel brands.
Why it fits: Lululemon shows both the power and the limitations of controlling your own distribution.
The company built an exceptional business by owning the customer relationship rather than relying heavily on wholesale. That gives it control over pricing, stores, product launches, and customer data.
But direct distribution cannot compensate for weak products or declining customer enthusiasm. If traffic falls, there is no large wholesale network to absorb the weakness.
What stands out: Q2 revenue fell 4% to $2.4 billion, with Americas revenue down 8% and comparable sales down 12%. International revenue grew 4%, providing some offset.
The company still operated 825 stores at quarter-end and retains a global brand with substantial direct customer relationships. New CEO Heidi O’Neill now inherits the job of reigniting product and traffic growth.
What to watch: Americas comps, new products, store traffic, international expansion, inventory, marketing, and margins excluding one-time tariff benefits.
The Takeaway: Buy this if you want the turnaround play built on an unusually strong direct distribution foundation. If product momentum improves, Lululemon already owns the channels needed to capture the recovery.
The risk is that direct control becomes less valuable if customers simply want fewer of the products.
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Nike (NKE)
What it does: Nike is the world’s largest athletic footwear and apparel brand, selling through wholesale partners, Nike stores, digital channels, and apps.
Why it fits: Nike is the cautionary case for the entire theme.
For years, Nike pushed aggressively toward direct sales while reducing products supplied to some wholesale partners. The strategy promised better margins and deeper customer relationships, but it also weakened distribution and gave competitors more shelf space.
Management is now rebuilding wholesale relationships while trying to improve Nike Direct.
What stands out: Fiscal Q1 revenue fell 4% to $11.2 billion. Nike Direct declined 8%, including a 13% drop in digital revenue and a 5% decline in owned stores.
Wholesale performed better, declining only 1%, reinforcing why outside distribution still matters.
Nike is also launching a major operating transformation called Pace, targeting roughly $2.5 billion in cumulative savings through fiscal 2031, while management works to rebuild Sportswear, Jordan, and Greater China.
What to watch: Nike Direct, wholesale, digital traffic, North America, Greater China, inventory, product innovation, and execution on Pace.
The Takeaway: Buy this if you want the turnaround story showing why the winning channel strategy is probably not DTC versus wholesale. It is using both effectively.
The risk is that Nike’s brand recovery takes longer than expected while faster-growing competitors keep gaining share.
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Owning the Customer Is Not Enough
Direct-to-consumer can give a brand better data, more control, and potentially higher margins. But Levi’s, Ralph Lauren, On, Lululemon, and Nike show that the channel itself is not the competitive advantage.
The real advantage is having a brand customers actively seek out.
Wednesday’s Levi’s report should tell us whether its shift toward direct channels is still strengthening that relationship without sacrificing wholesale reach.
For you, the winning strategy may not be cutting out the middleman. It may be making sure the customer wants the brand no matter where they find it.
Best Regards,
— Adam Garcia
Elite Trade Club
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