Levi’s is continuing its diversification strategy, with plans to expand its accessories line and explore new women’s categories.
As part of its multi-pronged approach, the company is focusing on its initiatives to expand its wholesale distribution in order to gain share within the largest department store retailers, said Chip Bergh, president and CEO. Efforts include elevating its product presentations, broadening its portfolio, making incremental penetration within premium retailers, and growing its footprint and distribution in existing specialty and regional retailers.
The apparel company is expanding its digital business across pure-play, wholesale dot-com and its own e-commerce site, while mounting its presence with its mass-channel partners. “We believe these initiatives will support our aspiration to manage the U.S. wholesale business to flattish over time,” Bergh said in a recent earnings calls.
It will also continue to grow its market share in women’s denim, where it currently occupies the No. 2 spot in the U.S., he said.
“Our total women’s business grew 14% in 2019, approaching $1.8 billion in four years in a row of double-digit growth,” he said, noting that the company has seen rapid growth of such women’s fashion fits as its ribcage high-rise styles and loose-fitting balloon jeans.
Levi’s is also differentiating its business by expanding its accessories line and exploring new women’s categories, such as body wear, which Bergh described as a natural brand extension that will provide a long runway for growth in the women’s category.
It will continue to expand its direct-to-consumer strategy as well by opening more doors with smaller footprints in the United States, with a handful of test stores planned for this year.
The calendar was not in Levi’s favor this fourth quarter, the company noted in its earnings statement, as it failed to incorporate Black Friday and the accompanying bump in sales. As a result, net revenue dropped 2%, to $1.57 billion, with adverse effects also experienced by political unrest in Hong Kong and the company’s acquisition of a distributor in South America.
When it adjusts for this unfavorable dating, however, Levi’s saw Q4 net revenue grow 3%, driven by its expanding DTC presence and international growth.
The overall product trends driving the jeans category are a continuation of the same theme the company has seen for the last year or so, “which is a macro trend of casualization and the evolving impact of street wear and streetwear influence,” Bergh said.
Levi’s Signature and Denizen value brands, meanwhile, which represent about 7% of the company’s total business, grew mid-single digits in 2019.
Although the company intended to accelerate growth in China, these plans are expected to take a hit with the Cronona virus outbreak. The company has closed 50% of its fleet there, Bergh said, and put a halt to all employee travel in and out of China.
“While this will put a damper on our growth in China in the near-term, we are continuing to execute on our strategies there,” he said, noting that mainland China is just 3% of the company’s business.
Harmit Singh, executive VP and CFO, said the company “hit the ground running” for its fiscal 2020 and was pleased with its global holiday results, with global revenue growing mid-single digits. He noted that the company was intentionally less promotional during the holiday season.