Levi’s Revival Turns to Re­vamp

Ceo Chip Bergh is push­ing the denim main­stay be­yond its tra­di­tional bound­aries and em­pha­siz­ing mod­ern­iza­tion.

WWD Digital Daily - - Front Page - BY EVAN CLARK

Chip Bergh is on top — but still feel­ing a lit­tle antsy.

In an in­ter­view with WWD, the Levi Strauss & Co. pres­i­dent and chief ex­ec­u­tive of­fi­cer ticked off the ac­com­plish­ments for the third quar­ter just ended.

It was the fourth con­sec­u­tive quar­ter of dou­ble-digit rev­enue growth. The women’s busi­ness in­creased by 26 per­cent, mark­ing 13 quar­ters of growth. The di­rect-to­con­sumer busi­ness was up 15 per­cent. The long-be­lea­guered Dock­ers brand posted a 2 per­cent ad­vance, the first gain in a long

while as new looks were rolled out as part of a push to get the busi­ness on track.

And the com­pany sold a T-shirt ev­ery sec­ond dur­ing the past six months — il­lus­trat­ing its global scope, scale and mo­men­tum.

“Fun­da­men­tally our strate­gies are work­ing,” Bergh said. “The in­vest­ments that we’ve made over the last cou­ple of years, they’re re­turn­ing” re­sults. The com­pany has been fo­cus­ing on grow­ing its prof­itable core, ex­pand­ing be­yond that and de­vel­op­ing other cat­e­gories like women’s tops and then de­vel­op­ing the chops of a world-class click-and-brick re­tailer. Mar­ket­ing has also been beefed up to keep the Levi’s brand front and cen­ter.

Af­ter seven years, Bergh’s turn­around of Levi’s would seem com­plete. The Levi’s brand feels rel­e­vant again and vi­brant on a global stage, with Air Jor­dan and Supreme col­lab­o­ra­tions connecting with younger shop­pers and push­ing the com­pany to­ward its first year since 1999 with sales of more than $5 bil­lion.

But Bergh is still on the move.

Last month, he re­worked the c-suite, con­sol­i­dat­ing prod­uct de­vel­op­ment and the sup­ply chain un­der Liz O’Neill, while the dig­i­tal and brick-and-mor­tar busi­nesses were put un­der Marc Rosen. That gives key lead­ers broad con­trol of two dis­creet and vi­tal func­tions, with one chain of com­mand for mak­ing and de­liv­er­ing goods and an­other for con­trol­ling the end ex­pe­ri­ence and sell­ing to con­sumers, when­ever and wher­ever.

Levi’s is also look­ing for an ex­ec­u­tive to lead a new strat­egy and an­a­lyt­ics unit that will re­port di­rectly to Bergh to soup up the busi­ness with data, giv­ing the com­pany founded in the Gold Rush a spin that’s very much in keep­ing with San Fran­cisco’s fo­cus to­day.

“When you’re hav­ing a string of successes like we’ve been hav­ing now for al­most two years, the big­gest risk is com­pla­cency,” Bergh said. “And prob­a­bly one of the best in­di­ca­tors of com­pla­cency is to try to pro­tect the sta­tus quo. I wanted to use the op­por­tu­nity of the mo­men­tum that we’ve had to make some struc­tural changes.”

While some changes are catch­ing up to the times — Bergh noted con­sumers “don’t roll out of bed in the morn­ing and say to­day is a brick-and-mor­tar day or to­day is an e-com­merce day” — the strat­egy and an­a­lyt­ics piece is more for­ward-lean­ing.

“I’m mak­ing a state­ment here by hav­ing that role re­port to me,” Bergh said, not­ing that the com­pany has the ad­van­tages that come with oo­dles of data, but can use the in­for­ma­tion bet­ter. He pointed to de­vel­op­ments in ar­ti­fi­cial in­tel­li­gence and ma­chine learn­ing that can su­per­charge the use of in­for­ma­tion locked away in its files.

Like all of fash­ion and re­tail’s legacy brands, Levi’s stands at a cross­roads.

Hav­ing mas­tered the back-and-forth be­tween ven­dors and stores and the mad­dash scram­ble to at­tract shop­pers to the mall, the big play­ers know the rules have changed and are go­ing to keep chang­ing. And even if the strong econ­omy has con­sumers spend­ing now and the hol­i­day out­look is rosy, the in­dus­try is bet­ting that the fu­ture will look dras­ti­cally dif­fer­ent, even more dig­i­tal and driven by di­rect con­nec­tions to shop­pers.

Fash­ion knows new skills are needed — and quick.

It’s a re­al­iza­tion that has brought a new fo­cus and pri­or­i­ties far be­yond Levi’s. Tapestry Inc. and Michael Kors Hold­ings Ltd. are chas­ing dreams of be­com­ing the Amer­i­can ver­sion of LVMH Moët Hen­nessy Louis Vuit­ton by build­ing port­fo­lios. Wal­mart Inc. has made a re­mark­able dig­i­tal pivot, buy­ing Jet.com, Bono­bos and more. VF Corp. is split­ting it­self in two, mov­ing its thriv­ing out­door busi­nesses to a Den­ver head­quar­ters and spin­ning off the more staid Lee and Wran­gler busi­nesses.

All of these changes in the mar­ket­place — and all at once — count as a land grab for the fu­ture con­sumer space and open up op­por­tu­ni­ties.

Bergh said he doesn’t ex­pect the VF jeans spin-off to spell big changes for his com­pany. “We’ll stay on our game and con­tinue to fo­cus on ex­e­cut­ing or strate­gies,” he said.

But the ceo added that the com­pany would be ready to “take ad­van­tage of the in­evitable con­fu­sion that will hap­pen as they do sep­a­rate.”

Al­ready, Levi’s is com­ing from a po­si­tion of strength.

Levi’s third-quar­ter net in­come shot up 48 per­cent $130.1 mil­lion from $88 mil­lion a year ago as net rev­enues in­creased 9.9 per­cent to $1.39 bil­lion from $1.27 bil­lion.

Gross mar­gins ex­panded to 53.2 per­cent of rev­enues, up from 51.8 per­cent as the com­pany de­vel­oped its di­rect-to­con­sumer busi­ness. Levi’s added 65 stores over the past year, for a to­tal of 798, and logged 8 per­cent growth in whole­sale sales. (The com­pany is pri­vately held, but has pub­lic debt and so re­ports on its re­sults quar­terly).

The growth has Levi’s not just charg­ing for­ward, but adding to its rainy-day fund — its cash and equiv­a­lents tal­lied $613 mil­lion at the end of the quar­ter on Aug. 26. To­gether with the firm’s re­volv­ing credit fa­cil­ity, it has a to­tal liq­uid­ity of

$1.3 bil­lion.

Levi’s has not fo­cused on spend­ing that money to add a brand, but the com­pany has never counted it out.

Asked about any po­ten­tial ac­qui­si­tions on a con­fer­ence call with an­a­lysts, Har­mit Singh, ex­ec­u­tive vice pres­i­dent and chief fi­nan­cial of­fi­cer, said, “There are cer­tain cat­e­gories we would take a hard look at,” but noted that any deal would have to be “the right fit cul­tur­ally” and show a good re­turn on the in­vest­ment.

If that “right fit” was found and the stars aligned, even more change could come to Levi’s.

Chip Bergh con­tin­ues to push change at Levi Strauss & Co.

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