Levi Strauss CEO on gains from digital transformation

Digital transformation initiatives at Levi Strauss & Co have gained momentum as the fashion brand gained from higher investment in its online business and retail stores.
Levi Strauss store
Levi Strauss & Co has reported revenue of $1.31 billion (+5.4 percent) in the second quarter ended May 26, 2019.

Levi Strauss posted a 17% dip in quarterly adjusted profit as the iconic apparel maker was hit by a stronger dollar, higher marketing costs, and investments in its online business.

The management team headed by Levi Strauss & Co CEO Chip Bergh and CFO Harmit Singh is following a strategy in order to become a leading world-class omnichannel retailer. The direct-to-consumer business, which includes the brick-and-mortar stores and e-commerce sites, grew 14 percent in the quarter in total and has grown in double digits for 13 consecutive quarters.

Levi Strauss’ revenue growth from brick-and-mortar stores rose 12 percent. The e-commerce growth was 25 percent for the quarter, with increased traffic in all 3 regions. Levi Strauss began to roll out ship-from-store program in U.S., which will allow the iconic fashion brand to optimize inventory, augment sales, and improve store productivity.

Levi Strauss said the strong direct-to-consumer growth was driven by higher traffic and conversion rates in existing stores in addition to new company-operated stores and e-commerce growth of 28 percent.

“We’re going to begin to give our consumers an opportunity to personalize or customize their own jeans online using the F.L.X. technology. They’ll be able to go online and design their own jeans and in a couple of days and it will arrive in their — on their doorstep. We’ll charge a premium for it,” Chip Bergh said.

Levi Strauss, as part of the digital disruption strategy, uses lasers instead of hand finishing. This will drive a fairly significant savings in production cost because of the use of a machine instead of people. It should some balance sheet benefits from a supply chain and inventory benefits as well.

Levi Strauss at present uses F.L.X. technology for making about 25 percent of the Levi’s denim bottoms business. Levi Strauss will enhance the use of F.L.X. technology in the next two years.

Intel in 2016 announced the launch of the Intel Retail Sensor Platform, a near real-time RFID inventory solution that is already in use by Levi Strauss & Co.

Intel said the IoT platform tracks items through RFID tags, preserving customer privacy, while keeping sales staff informed on inventory, stocking, customer traffic, and local demand. It can reduce losses from misplaced or out-of-stock items, and inventory shrink.

Earlier, Levi Strauss & Co announced the appointment of former Vodafone executive Katia Walsh as chief strategy and artificial intelligence officer, effective April 29. Walsh will build out the company’s data, analytics and AI capabilities that will grow the business and fuel new business models — powered by machine learning.

Rajani Baburajan