Last year was a tough one for Levi Strauss & Co. — and the world — but chief executive officer Chip Bergh said the company is ready to deliver on its pandemic promise and come out of the crisis stronger.
The San Francisco firm, which wrapped its fiscal year up on Nov. 29, turned a profit again in the fourth quarter, continuing to pick up momentum since the worst of the coronavirus lockdowns.
Now, Bergh and Co. are looking at returning to the company’s pre-COVID-19 revenue rate sometime later this year.
Bergh told WWD in an interview Wednesday: “Against our own internal expectations that we set back after the pandemic hit us [and] considering all the headwinds that we face, we had what I would consider a really strong year. We were profitable [in the third and fourth quarters and on an adjusted basis for the year]. At one point of time we weren’t even sure we were going to make money this year.”
Levi’s fourth-quarter profits tallied $56.7 million, or 14 cents a share, down 40.5 percent from a year earlier, as adjusted income fell 25 percent to $81 million. Sales for the three months fell 11.7 percent to $1.39 billion.
For the full year, Levi’s posted net losses of $127.1 million, down from earnings of $394.6 million a year earlier. On an adjusted basis, earnings fell 82 percent to $84 million as sales decreased 22.7 percent to $4.45 billion.
Given everything — from the complete retail shutdown in March to the epic recession to continuing uncertainty — that is a result that Bergh is counting as a win.
“We said we plan to emerge from the pandemic stronger than we were going into the pandemic, and we were kind of on a roll going into the pandemic, and I’m confident we will [emerge stronger],” he said.
It wasn’t easy going.
Levi’s laid off about 700 managers, or 15 percent of its global management headcount, in July as it adjusted to the reality of lower sales, at least temporarily.
“It was a painful thing to do, but it was necessary,” the CEO said. “We knew we were going to be a smaller company.”
If Levi’s is smaller, it’s also learned how to be more agile and has a profitable e-commerce business that’s grown quickly during the crisis, Bergh said.
“It sets us up for the future, the nimbleness that we had to rely on because of the pandemic,” he said. “We’ve built some new muscles, the brand has never been stronger.”
Operating margins were 7 percent in the fourth quarter and Bergh said the company could boost that to 12 percent as it grows annual revenues back toward $6 billion.
Chief financial officer Harmit Singh said Levi’s overall has become “structurally a much stronger business, more digital, more international, more direct-to-consumer. What this leads us to become is a brand that’s more directly engaged with our consumer.” (In a sign of confidence, the company has started paying dividend to shareholders again).
And through closer work with Target, Levi’s is finding new consumers as well.
In addition to officially introducing Red Tab products at Target last year, following a series of tests, the denim giant is doing a limited time collaboration with the discounter that’s heavy on home products.
Bergh said Target CEO Brian Cornell called him a couple years ago citing research that found that the number one brand that Target customers wanted, but couldn’t find in the store was Red Tab.
That led to a trial run in 20 stores that just kept growing.
Red Tab is now in 140 Target stores with plans to expand that to 500 this fall.
“It’s been a great relationship, it’s been highly productive,” Bergh said. “It’s a tight assortment, but we’re really pleased with the presentation.”
Given the size of the assortment, the Red Tab out-the-door price at Target is higher than the brand’s U.S. wholesale average.
That relationship will be expanded with the home-orientated collaboration.
“Those moments are center-of-culture moments,” Bergh said. “They create a very special moment for the guest. They came to us quite some time ago about this with a fully baked idea of doing a limited-time-only collaboration with Levi’s.”
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