Chip Bergh

Normality might be a long way off, but Levi Strauss & Co. showed signs of something that looked a lot more normal-ish in the third quarter than the crisis it suffered through in the spring and summer with the rest of fashion.  

The denim company managed to return to profitability, posting net earnings of $27 million on Tuesday for the three months ended Aug. 23. That marked a steep decline from $124 million logged a year ago, but also an important milestone on the way back. Adjusted earnings before interest and taxes fell 52 percent to $84 million. (For the nine months so far this year, Levi’s is still in the red, with a net loss of $184 million).

Chip Bergh, chief executive officer, attributed the profits to the company’s quick moves to adjust course early in the pandemic, including cutting 15 percent of its corporate workforce. And Levi’s is still moving, following customers online — a migration the company was already preparing for, but one that came much faster than expected with so many millions stuck at home following social distancing rules. 

Levi’s e-commerce growth shot up 52 percent, although that wasn’t enough to buoy the overall top line, which fell 27 percent to $1.06 billion from $1.45 billion.

“We were really pleased with our quarter,” Bergh said in an interview with WWD. “It feels like an out-of-body experience to say that with revenues down 27 percent.”

Traffic in the company’s stores is still down, but overall the business is outperforming internal expectations. 

“We basically lost money in one quarter during this pandemic, this [latest quarter saw] a pretty significant turnaround,” the ceo said. “Our whole focus has been to emerge from this crisis stronger.” 

Bergh said Levi’s is on track to do just that — and that includes being ready for a much more digital consumer. 

“Consumer behavior has changed,” he said. “Seventy percent of the customers that shop on this past quarter were new to”

The brand now gets about 24 percent of its revenues from the web, including third-party sites, and that is twice its online take from a year ago. (The company’s owned e-commerce sites have also doubled from a year ago and account for 8 percent of revenues).

The company’s web site turned profitable last quarter and Bergh said it would make money in 2020, a year ahead of schedule. 

“It is about being agile and following the consumer,” the ceo said, pointing to the company’s efforts to fulfill online orders quickly from its stores and to offer curbside pickup. “The consumer is clearly telling us their shopping patterns are going to change.”

But Levi’s still believes in stores — and partnerships.

After the company’s results were released, Target Corp. said it was bringing Levi’s Red Tab label to 500 stores by next fall, expanding on a test that began last year. 

Target has been selling Levi’s Denizen collection for a decade, but the addition of Red Tab is a significant expansion for one of the brand’s key lines into the mass market realm. 

Bergh said the company is also pressing ahead with brick-and-mortar plans. “We’re continuing to add stores and we have opened a number of our next-gen stores,” he said. “We are optimistic about brick and mortar because it is the best way to bring the Levi’s brand to life.”

Still, stores are lagging right now as many people venture out only cautiously and tourist centers see fewer visitors.

“The big limitation right now is traffic,” Bergh said. “Traffic is still down globally in almost all of our stores.”

There is something of a silver lining, however.

“When consumers do come into a store, they’re on a mission and our teams are great, they buy what they came in for and they also sell them a sweatshirt,” he said.

Right now, that will have to be enough.

“I don’t think we’ve hit a new normal yet,” Bergh said. “But we are seeing sequential improvement and barring a big second wave [of COVID-19] in the fall, barring another major outbreak where we have to close a lot of stores and everything, we are cautiously optimistic.”

Sometime next year, he said the company would meet and then exceed the levels seen in 2019.

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