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As Online Sales Double, Levi’s Plans Expansion into 500 Target Stores

With no prior pandemic comeback to measure against, denim giant Levi’s did “substantially better” than it expected during the third quarter, said company president and CEO Chip Bergh.

“Our brand is the strongest it’s ever been and as the lockdowns lift, we’re seeing consumers coming into stores on a mission,” he said during the company’s earnings call on Tuesday.

While brick-and-mortar stores continue to reopen, consumers are turning to Levi’s e-commerce with that same mission. Levi’s global digital business, which includes its e-commerce sites, as well as the online business of its pure-play and traditional wholesale customers, comprised nearly a quarter of total Q3 revenues, doubling the company’s digital footprint from the prior year.

Upgrades to Levi’s e-commerce sites in Canada, Europe and the U.S., Bergh noted, have allowed shoppers to navigate and search the site faster, while more streamlined cart and checkout capabilities are driving increased conversion.

Consumers are spending time on Levi’s mobile app as well. Driven by more frequent exclusive collaborations and opportunities to access product early, Bergh reported that 70 percent of those downloading the app are new users and conversion with them is nearly double. “We’re making good progress leveraging the use of data analytics and machine learning in more aspects of our business,” he said.

Levi’s migration to digital is happening behind the scenes as well. During the call, Bergh said the company is preparing to execute its second digital global line launch for the Levi’s brand this month using digital tools to assort the line and drive increased efficiency.

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This launch follows the June debut of Levi’s direct omnichannel digital showroom in Europe. Though it was initially planned as a small-scale test for handful of accounts, Bergh said the company accelerated this capability due to Covid and conducted full digital sell-ins for Spring/Summer ’21 with their top 200 wholesale and franchise partners in Europe.

“Due to the great success we had, we are rapidly evolving this functionality and will begin scaling it globally over the coming months,” Bergh said. “We believe we are positioned to stay ahead of competition in this comprehensive digitization of our go-to-market capabilities.”

The future is female

Like many of its peers, the company has been swayed by the boom for comfortable at-home fashion. As people seek out more casual comfort, Bergh said Levi’s is “defining and leading trends with the launch of new looser, more relaxed silhouettes across bottoms and tops.”

The women’s category, in general, is a bright spot in the brand’s rebound. “The global women’s business continues to show strength as women’s share of total revenues grew to 37 percent of the total,” Bergh said, adding that in the company’s top 10 wholesale accounts, the women’s business grew 13 percent.

The company anticipates that women’s will soon become half of Levi’s total business as it grows at a faster rate than men, especially as it capitalizes on opportunities internationally and expand non-denim categories such as tops.

“We’ve said this right from the very beginning, that crisis creates an opportunity,” Bergh said.

Nearly a quarter of women’s Q3 revenue was generated from tops, Bergh noted, including non-woven tops. This uptick speaks to the consistent demand for Zoom-friendly blouses as well as Levi’s efforts to broaden its appeal beyond denim.

Women’s shorts performed well for the brand in Q3, too. Shorts, in both traditional 501 style and fashion styles, grew double-digits, while women’s bottoms delivered half of the quarter’s total growth with strong performance in 501 shorts, cropped, ribcage and 721 high rise fits.

On Target

Levi’s is also expanding its partnership with Target, bringing its Levi’s Red Tab collection to 500 Target stores by Fall 2021. Target added the brand to 140 stores last year—a droplet in the company’s portfolio of more than 1,800 stores in the U.S.—but it has been enough to make an impact.

Both Levi’s and Target, Bergh said, have been pleased with the performance of the test of men’s and women’s, hence the decision to expand to 500 doors over the course of the next year. He said the brand is “picking up incremental new consumers” through the Target deal.

The partnership with the mass-market retailer, he added, is good for both its value-driven line Denizen and its Red Tab label collection. Bergh reported that there is no “negative cannibalization” by having both the Denizen and Red Tab Label collections on the store floor.

In fact, when Levi’s began testing Target, Bergh said they pulled Denizen out of the stores to make room for Levi’s. Collectively, he said both companies concluded that was a bad idea. “We went back,” he said. “We tested Denizen back in those same doors and it proved that these are two different consumers.”