Levi Strauss & Co. CEO Chip Bergh says the denim giant is at its strongest point “in decades” after it steered through the pandemic’s worst.
The San Francisco company overcame supply chain problems, steep logistics costs and labor shortages to beat its internal recovery projections last year. It slightly outperformed 2019 revenues, reaching over $5.8 billion—a 29 percent improvement from 2020 and its highest revenue since 1998, Bergh said in the firm’s annual report.
Levi’s achieved record adjusted gross margins of 57.9 percent by revising its cost structure and refocusing on digital during Covid-19’s early days. Adjusted EBIT margins reached $713 million, up from $181 million in 2020 and $611 million in 2019. “We accomplished this despite the impact of COVID-related store closures and soft retail traffic,” Bergh wrote. “Our structural economics are stronger, the Levi’s brand has grown share globally, and our strategic focus on driving DTC and continuing to diversify the business have driven our results.”
With $737 million in operating cash flow generated during 2021, Levi’s is continuing to invest in technology and infrastructure. It also cashed in on the activewear trend—which is five times larger than denim, and growing more quickly—by shelling out for Los Angeles activewear brand Beyond Yoga. These investments are already delivering the highest return on invested capital in 10 years, allowing Levi’s to return almost $200 million to shareholders in dividends and share buybacks, Bergh said.
The denim business continues to drive the company’s revenue, and Levi’s remains the No. 1 men’s and women’s denim brand worldwide. In the U.S., the largest denim market, Levi’s ranks No. 1 with men and No. 2 with women, and it is gaining wallet-share from consumers ages 18-30—the only brand among the top five to do so. Bergh believes looser silhouettes, mirroring the overall shift in apparel toward more relaxed, casual fits, to rising Gen Z and millennial interest. Doubling down on sustainable messaging, Levi’s launched an advertising campaign around the concept of “Buy Better, Wear Longer,” and elevated its SecondHand offering to attract consumers interest in planet-friendlier purchasing.
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Levi’s digital channels generated 60 percent more revenue than 2019 on stronger e-commerce investments and an uptick in online shopping. In 2021, online sales accounted for 22 percent of total company revenues, compared with 14 percent before Covid. Bergh expects e-commerce to continue as high-growth, profitable part of the business. “We continue to invest in our e-commerce experience and creating highly personalized recommendations for online shoppers,” he added. “Our loyalty program and mobile app are seeing strong acquisition rates, meaningful growth in performance and productivity of existing members.”
Levi’s shoppers embraced omnichannel services merging digital touchpoints with store-based interactions. The company last year opened 92 smaller format stores with services like mobile checkout and curbside pickup. Owning the consumer’s experience from start to finish deepens the connection with the brand while padding margins, Bergh said.
Earlier this year Levi’s transformed its Henderson, Nev. distribution center to fulfill orders from retail, wholesale and e-commerce. The facility aims to reduce lead times, costs and reliance on third-party logistics providers. Similar Levi’s owned-and-operated facilities are now being built in on the East Coast and in Europe.
Digital also informs business operation as Levi’s is using data to drive decisions, gauge consumer appetites and quickly respond to market trends. A company bootcamp that teaches AI and machine learning has already upskilled more than 100 employees in data science and coding.
“We’re accelerating our momentum by diversifying across categories, channels and geographies,” Bergh wrote, noting opportunities to grow internationally and beyond denim. “We will continue to invest in our stores and online platforms to expand our footprint and create exceptional and memorable connections.”