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Levi’s Wants to ‘Premiumize’ the US Market—Here’s What That Means

With 2019 in the books, it’s safe to say the past year was a historic one for Levi Strauss & Co. as it returned to the public equity markets with a spring IPO.

In the aftermath of the public offering, the venerable denim apparel company’s president and CEO Chip Bergh said Levi’s “maintained focus on what we could control in a challenging environment and executed against our objectives.”

Strategic initiatives

The company has continued efforts to diversify its business by expanding its direct-to-consumer presence and its international offering, which, Bergh told analysts on a conference call discussing fourth-quarter and fiscal-year results, has been “the backbone of our success.”

Collaborations continue to generate brand heat, as well as drive traffic in sales, and looking forward to 2020, you can expect to see the Levi’s brand come to life with many more exciting, unexpected and innovative collaborations in the pipeline,” he said. “We continue to evolve the Levi’s consumer experience to create deeper connections with our fans.”

In 2019, Levi’s unveiled several creative collaborations with the likes of Star Wars, Hello Kitty and Stranger Things. It also worked with Nike to launch an exclusive collection of footwear and partnered with Google to create an improved version the Smart Trucker that allows consumers to control their phone from the comfort of their jacket.

“In 2019, these collaborations delivered over 12 billion impressions globally, equating to roughly $100 million in immediate value,” Bergh said.

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Next-gen retail

On the retail front, with 100 new stores planned in 2020, the company opened six “next-gen” stores across Europe and Asia in 2019 that amplify the Levi’s brand through redesigned storefronts, tailor shops, updated fitting rooms and more.

“As we exited the year, we launched our largest ever popup in Miami, 45,000 square feet, which…has been a hotspot this week in the run up to the Super Bowl,” Bergh said. “The popup showcases the best of our brand and the future of retail, [with] Levi’s premium products, our largest and most innovative tailor shop, interacting one of the kind experiences, technical innovations and collaborations with well-known artists such as Shepard Fairey and Cey Adams.”

Product development

Focusing on product, Bergh said men’s bottoms grew low single digits for Levi’s, while Dockers men’s bottoms declined. The company’s Top 10 global wholesale customers collectively grew 2 percent “despite a disrupted U.S. channel” and its Top 5 mature markets also grew 2 percent, within which the international markets were collectively up 10 percent and the U.S. was down 1 percent for the year, he added.

“We have several initiatives in place to strengthen performance in the U.S. market,” Bergh said. “We have the opportunity to expand distribution at wholesale and in direct-to-consumer, and to ‘premiumize’ the marketplace on the back of the strength of our brand by offering a broader assortment of our better and best products across both men’s and women’s in order to offset some of the macro trends we are seeing in wholesale.

“Initiatives in the U.S wholesale channel include gaining share within the largest department store retailers,,” he continued, “through elevated product presentations and broadening our portfolio, incremental penetration in the premium retailers and selectively adding distribution and enlarging our footprint in existing specialty and regional retailers.”

Levi’s is also expanding its digital business across pure-play and wholesale dot-com and its own e-commerce site, while growing its presence with mass-channel partners, like Target.

“We believe these initiatives will support our aspiration to manage the U.S. wholesale business to flattish over time,” Bergh said. “In our U.S. direct-to-consumer channel, we will open more mainline doors leveraging the successful model we deployed internationally–smaller footprint, more profitable, more capital-efficient stores in better locations.”

The company’s total women’s business grew 14 percent in 2019, approaching $1.8 billion, with four consecutive years of double-digit growth, the CEO noted.

“We are driving trends and leading the category and innovation, demonstrated by the rapid growth of our women’s fashion fits, including high-rise styles like the ribcage and looser-fitting bottoms like our new balloon jean, which are really resonating with the consumer,” Bergh said. “We also have recently expanded our accessories line and ventured into new categories in women’s, including body wear.”

The total tops business grew 14 percent in 2019, driven by the success of a wide spectrum of tops, including T-shirts, fleece, outerwear and trucker jackets. Emerging markets of India, Russia and Brazil all posted strong double-digit growth, and though modest at 2 percent, mainland China is back to growth,” Bergh said.

China remains a growth priority but Bergh noted how the coronavirus has thrown a wrench into Levi’s plan for the region.

“Our plan is to accelerate growth in mainland China in 2020, and December was a very strong month,” Bergh said. “And then the virus had a significant impact to our business in January. It is really unfortunate how the outbreak of the recent virus has been impacting people’s lives, especially during the Chinese New Year. We are taking this seriously and responsibly with our top priority being our people and our business partners. As a result, we temporarily closed roughly 50 percent of our fleet and have stopped all employee travel in and out of China.”