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Can Levi’s Be More Than a Denim Brand?

The American retailer wants to reach $10 billion in sales by 2027, with plans to open more stores, expand into new categories and potentially buy other fashion companies.
Levi's, 501 jeans, Hailey Beiber, Denim, Marketing
Levi's new 501 campaign featuring Hailey Beiber. (Levi's)

Key insights

  • Levi Strauss & Co. set a target of $10 billion in sales by 2027, up from $5.8 billion in its most recent fiscal year.
  • As part of its growth plan, the retailers will open 400 stores and expand its non-denim categories.
  • The company is also looking to acquire new brands in the womenswear, footwear and outerwear categories.

Levi Strauss & Co. may be the world’s most popular jeans brand. But that’s no longer enough, chief executive Chip Bergh said Wednesday.

In a presentation to investors, Bergh laid out an ambitious strategy that over the next five years would turn the American jeans retailer into an international conglomerate with a portfolio of brands, hundreds more stores and a strong presence in categories beyond denim, including tops and womenswear. The company set a target of $10 billion in sales by 2027, up from $5.8 billion in its most recent fiscal year.

“We’re coming out of the pandemic a much stronger company — a company with the ability to invest back into our business,” Bergh told BoF in an interview Tuesday.

The bulk of that growth will come from the core Levi’s brand, as well as Dockers, which it introduced in 1986, and Beyond Yoga, the activewear label the company acquired last August for $400 million. But entering new markets will potentially come through acquisitions too, the company said.

“We’d like to build a portfolio of brands that would make us one of the best apparel companies in the world,” Harmit Singh, chief financial officer at Levi’s, told BoF. “We could buy something around the size of Beyond Yoga or slightly bigger and can [scale them] quickly.”

At the time of that sale, Levi’s said the deal would add more than $100 million to revenue in 2022.

Janet Kloppenburg, founder of the retail research firm JJK Research said potential targets could include upmarket retailers such as Ulla Johnson, Veronica Beard or Aritzia that would give Levi’s greater access to wealthier customers, or direct-to-consumer brands that complement the company’s core offerings, such as Buck Mason or Marine Layer.

While Levi’s doesn’t have a history of managing other brands, it is well-run and has the scale to grow any acquisitions, she said.

“They’d want to find upmarket [brands] with a unique following that they can help explode,” Kloppenburg said. “We haven’t seen them prove what they can do with a company like Beyond Yoga yet, but they do have a very good centralised system.”

The Growth Trajectory

When Bergh joined Levi’s 11 years ago, the century-old company was struggling to remain relevant. Its revenue peaked in 1996 at more than $7 billion. Sales were flat in the 2000s and early 2010s. Its customer base was mostly male and skewed older.

Under Bergh, Levi’s “reset” its women’s collection, which went from accounting for 26 percent of net sales in 2011 to 33 percent last year. Since 2015, the average annual growth rate of the company has been about 6 percent.

Through the right marketing campaigns, a revamped wholesale strategy that favours more upscale stockists including Ssense and Shopbop, and collaborations with brands like Miu Miu, Levi’s found a unique position in the market that is at once accessible and elevated.

“Levi’s took a page out of Nike’s playbook and has created a halo effect for itself,” said Jessica Ramirez, senior analyst at retail firm Jane Hali and Associates. “They took their staple product, the 501 jeans, and added a luxury feel to them.”

At the same time, Levi’s kept prices relatively low compared to the designer brands it was now stocked alongside. This allowed the brand to grab market share from both high-end and mass rivals.

“Compared to designer brands in the denim category, they’re much cheaper,” said Kloppenburg. “And then at the lower end with the customer who used to buy Gap jeans, when they put on Levi’s, they say to themselves, ‘This is actually worth the 25 percent increase.’”

In the next five years, Levi’s plans on growing sales by 6 percent to 8 percent annually. It also aims to increase its adjusted EBIT (earnings before interest and taxes) margin to 15 percent in 2027, up from 12.4 percent in 2021. Of the projected $10 billion in revenue in 2027, $1 billion is expected to be generated by Dockers and Beyond Yoga.

Levi’s will drive this growth by strengthening its direct-to-consumer channel, which includes e-commerce and 3,000 standalone stores across the world. Currently, DTC accounts for 36 percent of all revenue. By 2027, the company expects that share to reach 55 percent, partly thanks to 400 new locations, mostly smaller-format, “NextGen” stores. About 100 of these stores will be in the US.

Even so, Levi’s will continue to work with select multi-brand retailers and department stores.

“DTC first doesn’t mean DTC only,” Bergh said in his investor presentation Wednesday. “In the last few years, we’ve been laser-focused on evolving our wholesale strategy and the evolution of our wholesale footprint and it’s fair to say you’ll continue to see this evolution.”

The LS&Co. Portfolio

Differentiating assortment is another crucial way for Levi’s to maintain its growth, the company said, whether that’s through M&A or bolstering apparel categories outside of denim and penetrating new markets. There are still many segments of the “head-to-toe lifestyle” that Levi’s hasn’t sufficiently tapped into, according to Bergh. In terms of M&A, the company is focused on four categories: tops, womenswear, outerwear and footwear.

“The women’s business is about a third of our total business, but there’s no reason why it shouldn’t be on par with men’s,” he told BoF.

As a Levi’s customer herself, Ramirez of Jane Hali and Associates said she has seen firsthand the success of Levi’s merchandising strategy.

“When I told a friend recently my dress was from Levi’s, she replied, ‘Wow, it seems like Levi’s is really coming back,’” Ramirez said. “And she’s right.”

Looking ahead, it will be a matter of whether Levi’s can lend some of this success to the potential M&A targets. Direct-to-consumer startups can be finicky assets because they require significant capital investments to sustain, Ramirez added.

“These things can’t happen overnight,” she said.

Further Reading

With a market capitalisation of $8 billion, the original blue jean maker plans to open new stores, develop fabric technology, offer more points of customisation for customers and improve its e-commerce experience.

About the author
Cathaleen Chen
Cathaleen Chen

Cathaleen Chen is Retail Correspondent at The Business of Fashion. She is based in New York and drives BoF’s coverage of the retail and direct-to-consumer sectors.

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