These are dark days with the coronavirus clamping down on economies and keeping workers and consumers home. Like many fashion mainstays — from Ralph Lauren Corp. to Macy’s Inc. — Levi’s is stockpiling cash and furloughing workers as the COVID-19 shutdown forces it to keep stores in the U.S. and Europe closed.
But Bergh, who has led a renaissance at Levi’s as chief executive officer and took the company public last year, told WWD he is looking out for the here and now and also keeping an eye on the future, from his home office.
“We’re very focused on hunkering down, focused on cost, doing the things that we absolutely need to do since we’re not generating a lot of revenue now,” Bergh said.
Levi’s closed U.S. stores in mid-March and is paying associates through the first month of the shutdown, but then is furloughing about 4,000 employees.
“Stores are going to be closed for a while longer, who knows if that’s weeks or months at this point,” said Bergh, who is taking a 50 percent cut to his salary for now, something many ceos are doing.
But eventually they’ll open and the ceo is working to make sure Levi’s is ready.
“When consumers do eventually come back, they’re going to come back to brands they love,” Bergh predicted.
In addition to the omnipresent focus on brand at Levi’s, there’s also a focus on the balance sheet, which has been beefed up. The company ended the quarter with liquidity of $1.8 billion and later drew $300 million from its revolving credit facility.
Bergh said the winners and losers would be separated by their financial might and flexibility.
“We’re very focused on using this as an opportunity,” the ceo said. “When we come out of hibernation and when we’re able to reopen doors, we don’t want to just restart the business, we want to reset the business. How can we capitalize on this opportunity and take advantage of the opportunities that come along?
“We’re going to see competitors potentially go out of business. There are going to be great retail opportunities. Talent is going to be available during this period of time as the job market gets decimated, we’re going to be all over that,” the ceo said.
Bergh talked about building market share in perhaps a shrunken category.
“The business may be smaller, but we’re going to have stronger relationships with our fans,” he said.
And acquisitions — always just a very remote possibility at Levi’s — are on the table in a new way, with Bergh noting a potential deal could be considered more closely, but could still be hard to pull off given the financing market.
When it came to the first quarter, which now seems a distant lifetime, Bergh sounded almost wistful.
“We had a lot of momentum as this virus started,” he said.
For the first quarter ended Feb. 23, net income increased 4.2 percent to $152.7 million from $146.6 million a year earlier. Adjusted diluted earnings per share rose 2 cents to 40 cents despite a 2-cent hit from the early impact of COVID-19, which shut down stores in China.
Revenues rose 5 percent to $1.51 billion from $1.43 billion.
But hope is coming now from China. Wuhan, where the COVID-19 outbreak first hit, is opening back up.
Most of Levi’s stores have reopened in the country, including the beacon store in Wuhan. The firm is also converting franchise stores in Guangzhou and Chengdu to company operated.
Harmit Singh, chief financial officer, said the digital business in China was up year over year in March.
“We’re seeing some green shoots,” he said.
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