Levi Strauss hikes Capex focussing on digital transformation

Levi Strauss & Co. announced it is planning capital expenditures (Capex) of $210 million in 2020 – with a focus on digital transformation — as compared with $175 million in 2019.
Levi Strauss digital investment for transformation
The substantial increase in the capital expenditure of Levi Strauss includes costs related with information technology investments for the company’s e-commerce business and investment in company-operated retail stores.

Interestingly, Levi Strauss is also enhancing the number of retail shops to enhance customer experience. The company’s retail network had 81 more company-operated stores at the end of 2019 than a year prior.

Net revenues grew 3 percent to $5.8 billion. The lack of a Black Friday benefit in the fourth quarter and the acquisition of a South American distributor in 2019 adversely impacted the company’s revenues growth.

Levi Strauss said the company’s direct-to-consumer revenues were flat in the fourth quarter, as expansion and improved performance of the retail network and e-commerce growth were offset by the lack of a Black Friday benefit in the current year.

“Growth was broad-based by region, channel and category. Fourth quarter organic revenue growth met our expectations in spite of being masked by Black Friday falling in fiscal 2020,” Chip Bergh, president and chief executive officer of Levi Strauss, said.

Levi Strauss said the disruption in many of customers continued to experience in the channel was substantially offset by double-digit growth in premium and digital and a few bright spots at department stores, particularly high single-digit growth in women’s business.

Initiatives in the U.S wholesale channel include gaining share within the largest department store retailers, through product presentations and broadening portfolio, penetration in the premium retailers and selectively adding distribution and enlarging footprint in existing specialty and regional retailers.

Levi Strauss expanding digital business

Levi Strauss is expanding digital business across pure-play and wholesale dot-com and its own e-commerce site. Levi Strauss is also growing its presence with partners in the mass channel.

Levi Strauss CIO Chris Clark is responsible for developing its digital transformation plans and IT investment. Chris Clark joined Levi Strauss as the chief information officer (CIO) in January 2015. Chris Clark has over 25 years of experience leveraging technology investments to fuel profitable growth, deliver consumer, customer and employee experiences, and drive cost productivity.

Levi Strauss said its direct-to-consumer channel will open more mainline doors leveraging the successful model — smaller footprint, more profitable, more capital efficient stores in better locations. This will support the objective to increase distribution of our premium products in the U.S. marketplace.

Signature and Denizen brands grew in mid-single-digits in 2019. Both brands improved gross margins and leverage their cost bases improving profitability. Signature and Denizen collectively represent about 7 percent of total business.

Levi Strauss aims to become a leading omni-channel retailer. Global DTC includes the brick-and-mortar stores in e-commerce sites that it operates. Levi Strauss achieved direct-to-consumer growth of 10 percent.

Revenue from our brick-and-mortar stores was up 8 percent globally. Performance of existing sores improved both internationally and in the United States. Global e-commerce business rose 18 percent with strong growth in all three regions largely driven by increased traffic.

Levi Strauss, as part of enhancing omni-channel capabilities, has accelerated the U.S. rollout of ship from store due to strong performance.

Levi Strauss aims at leveraging RFID technology in more than 600 doors across 17 countries, including all of company operated mainline doors in China. Levi Strauss aims to provide inventory visibility and new consumer demand in real-time to enhance consumer experience and impacting top and bottom line of the company.

Levi Strauss has introduced the all new Levi’s app and royalty program in the U.S. which allows consumers to access curated, editorial and brand content as well as purchase premium products available exclusively on the app from limited edition collaborations to Levi’s authorized vintage truckers.

Levi Strauss plans to rollout the Levi’s app and loyalty program beyond the U.S. Levi Strauss said its international business is approaching 60 percent of total revenues. Direct-to-consumer is heading to 40 percent.

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