Levi Strauss & Co. plans to boost its capital expenditures about 50 percent in 2015, and much of the money will be earmarked to expand its retail operations.
Levi’s put $73.4 million into cap ex in 2014 and plans $110 million to $120 million in 2015.
“Last year we opened 50 owned-and-operated stores, and this coming year, that number will be up to about 60, with most of that outside of the U.S.,” Chip Bergh, president and chief executive officer of the San Francisco-based jeanswear giant, told WWD. “Retailing is becoming an increasingly important part of our business — it gives us stronger gross margin; we can control the consumer experience.”
Retailing, including e-commerce, expanded to 25 percent of Levi’s 2014 sales, or about $1.2 billion of the company’s revenues of $4.75 billion. That was up from 22 percent in 2013 and 21 percent in 2012. The company operated 565 stores worldwide at the end of 2014.
Most of Levi’s growth last year came from its direct-to-consumer operations, with wholesaling “essentially flat,” Bergh said. E-commerce, he noted, now constitutes about 3 percent of total sales and more than 10 percent of the DTC total.
Levi’s hadn’t previously quantified its e-commerce penetration.
The ceo noted denim remained challenged in 2014, but Levi’s had grown its market share in the U.S. and numerous international markets, aided by new “soft, stretchy interpretations” of denim and its “Live in Levi’s” ad campaign.
Bergh believes, as evidenced by the presence of jeans and jeanswear on designer runways, the category is starting to turn around, and to aid the process the company has introduced a new interpretation of the 501 style, dubbed 501 CT for “customize and taper,” as many consumers have done themselves to the vintage Levi’s they’ve found at flea markets. It is being launched in Levi’s U.S. stores with a wholesale rollout planned for the second half of the year.
The boost in cap ex is coming in part from money freed up by the company’s productivity initiative. It’s designed to generate $125 million to $150 million in annualized savings, but $53 million in associated charges contributed to a fourth-quarter loss at the company. In the three months ended Nov. 30, Levi’s net loss was $6 million, versus net income of $17 million in the comparable three months of 2013. Excluding charges, adjusted earnings before interest and taxes were up 86.1 percent to $134 million from $72 million. Revenues hit $1.39 billion, 7.2 percent above the $1.3 billion reported in the 2013 quarter.
Excluding currency fluctuation, revenues were up 10 percent.