Chip Bergh isn’t quite ready to make his last lap at Levi Strauss & Co. — but the chief executive officer, who’s preparing to hand the reins over to Michelle Gass, is certainly looking to finish strong.
The company on Wednesday topped estimates in what was a tougher fourth-quarter and continued to gain in what turned out to be a decidedly mixed year for the fashion industry.
For the fiscal year ended Nov. 27, Levi’s tallied net income of $569 million and adjusted earnings per share of $1.50 on $6.2 billion in sales, a gain of 7 percent on a reported basis and a 12 percent increase in constant currencies.
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“We’re really happy with the year,” Bergh told WWD. “It was a year of two halves for sure — a very, very strong first half and then midsummer we saw demand start to soften as inflation started to take hold, fear of recession and wholesale customers starting to cut back on their open to buys.”
Levi Strauss — which is known for denim, but also owns Dockers and Beyond Yoga — continued to gain in key respects even as the market weakened.
“As the [denim] category grew globally at about 1 percent, we built share, we actually grew market share more than any other player in the category,” Bergh noted, adding that the company has gained market share in five of the last six years and held its own during the COVID-19 lockdowns.
But the slowdown in the autumn — which hit nearly everyone in fashion outside of luxury — still took its toll.
Levi Strauss’ fiscal fourth-quarter net income fell 1 percent to $151 million, or 38 cents a diluted share, from $153 million, or 37 cents, a year earlier.
Adjusted income of 34 cents a share came in 5 cents ahead of the 29 cents analysts projected.
Sales for the three months decreased by 6 percent to $1.6 billion from $1.7 billion a year earlier.
The denim firm’s direct-to-consumer revenues fell 2 percent on a reported basis and rose 6 percent in constant currencies. Wholesale revenues slipped 8 percent, or 4 percent in constant currencies. Global digital revenues for the quarter were down 7 percent — but up about 29 percent from before the pandemic.
Despite the declines, Bergh said: “Clearly our strategies are working and we feel like we’re really well set up for fiscal 2023.”
Ultimately, it’s going to be up to Gass, the former Kohl’s Corp. CEO who is currently president at Levi Strauss, to follow through on those strategies.
Gass started on Jan. 2 and has been settling into the role, where she leads the Levi’s brand and the company’s global digital and commercial operations — which together account for about 85 percent of the company’s earnings.
For now, Bergh said his life hasn’t changed.
“I’m still working every single day,” he said.
But he reiterated that the company is going to be in good hands.
“Nothing prepares you to be a CEO other than being a CEO,” he said. “We are blessed to have an experienced CEO joining us. She’s really made a great first impression for the team. She and I have mapped out the transition and we’re going to be hitting the road a lot and spending a lot of time in markets and stores together. She’s going to have a positive impact this year and begin to set her agenda up.”
Gass’ arrival, though, is starting to bring change.
Chief financial officer Harmit Singh added the additional title of chief growth officer and is working closely with both Bergh, who he’s been with for 10 years, and Gass.
“We want to be a $9 [billion] to $10 billion company,” Singh said. “I’m going to work with them both to make sure we allocate resources to execute the long-term plan.”
As part of the new role, Singh will be focusing on real estate and working with landlords and using the power of the company’s portfolio to expand its three brands.
Growth might be harder to come by this year.
Levi Strauss is projecting revenues of $6.3 billion to $6.4 billion this year, growth of 1.5 to 3 percent, including 200 basis points of headwinds from currency fluctuations and the suspension of the firm’s operations in Russia. Adjusted earnings per share are slated to slip to $1.30 to $1.40.
“This year is also going to be a tale of two halves where the first half is probably going to be a little softer,” Singh said, pointing to macroeconomic weakness now and tough comparisons with the first half of 2022.