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Things had been humming along for Levi Strauss early in the year as it came off an exceptionally strong holiday season.
The 167-year-old jeans maker was reaping the benefits of big investments in the last few years in its e-commerce infrastructure and technology, its own stores, and in its merchandise under chief executive Chip Bergh.
Then came the coronavirus crisis which idled Levi Strauss in China in mid-January and is now doing the same in North America and Europe.
Yet, however devastating this crisis will be for Levi Strauss, as it already is for virtually any retailer not selling essentials, Bergh says those big investments and strategic shifts in the last few years will help Levi Strauss weather this storm much better than the competition.
“There will be winners and losers here,” Bergh told analysts on Tuesday evening after Levi Strauss reported strong quarterly results for the period ended Feb. 23.
Revenue rose to $1.51 billion from $1.44 billion a year ago, besting analyst estimates. But the rest of the year is murky, and Levi Strauss withdrew its initial forecasts and said it was furloughing its U.S. Retail staff.
Levi Strauss has gone to great lengths in recent years to exert more control over its brand, reducing its exposure in U.S. Department stores, and taking back stores from franchisees overseas, while modernizing e-commerce and its own stores. Bergh said that direct-to-consumer sales now make up 40% of its total, with e-commerce double what it was in 2015.
And in a prescient move to diversify away from department stores, which had been struggling for years even before the pandemic, Levi Strauss last year started selling its better Red Tab jeans at Target, whose stores are still open now. The company has also ramped up what it sells at Walmart, also operating stores, while the likes of Macy’s, J.C. Penney and Kohl’s are closed.
Bergh, a P&G alumnus who is now also the non-executive chairman of HP, has focused on tech to take some of the pain away from the coronavirus crisis, first in China, and he hopes, now in North America and Europe.
For instance, in China, where stores have almost all re-opened, Levi Strauss kept shoppers interested in the brand during the lockdown with do-it-yourself content on their website to help consumers customize their own Levi’s gear. Bergh said that while business is still below year-ago levels in China, it is improving by the week—and e-commerce in China is on pace to return to growth for quarter.
Another way Levi’s has turned lemons into lemonade: With so many music festivals cancelled this spring, the company launched its own month-long virtual music fest on Instagram called Live 5:01 Concert Series, a nod to its most iconic jeans model. Every weeknight, a different artist clad in Levi’s is featured. Recent performers have included Snoop Dogg and Brett Young.
Staying relevant will be crucial. Bergh expects that North America and Europe markets will take more time to get back to normal than China did.
“It’s quite possible here in the West we’re going to see a much bigger economic impact, more job losses,” he said.
One thing that has helped the company in China has been getting enough new merchandise to stores quickly to keep shoppers interested—the result of a faster corporate metabolism. Levi’s doesn’t have a ton of seasonal products; 70% of what Levi’s sells are its classic, core items, which means it won’t have to unload them by discounting them once stores re-open. Bergh debunked the myth that people are only buying nice tops since people can’t see them from the waist down on a Zoom conference call.
For now, Levi’s is trying to navigate the biggest crisis to hit retail in decades and outlast rivals. And that means keeping customers’ attention.
“We’re not going to let them forget about Levi’s, while they’re cooped up in their home,” he said.