Levi Strauss, the makers of Levi Jeans and Dockers pants, endured a rough time not so long ago. Sales peaked in 1997 at $7.1 billion and then sank to about $4 billion in the ensuing years as young people veered to other brands. Competitors like Walmart, Target, Gap and many others gained share of market from Levi Strauss in the casual pants classification.
Were the riveted jeans dead? It was patented in 1873 by German immigrant Levi Strauss who came to the United States about 20 years earlier as a wholesale merchant with some great ideas. Ideas that eventually built a successful business. But, the business floundered and by the early 2000s, the stock was sinking and only drastic action could save the iconic company.
The company chose Charles V.” Chip” Bergh in 2011 to take the helm of the company to right the ship, attract new customers and regain a leadership position. His background showed his preparedness for the challenge; he had been at Proctor & Gamble for 28 years, most recently working on Old Spice and deodorant and razors. Plus, he had brand knowledge and international experience.
CEO Chip Bergh tackled his new assignment by making some drastic changes.
- Get a lay of the land. Initially, Chip Bergh sent his top 60 managers six questions about the business. He wanted to hear directly from them.
- A new strategy. He then developed a strategy for his organization based on what his management team told him.
- New investments. He invested in facilities to broaden the clothing range focusing on women’s wear.
- New markets. He expanded into untapped markets including Russia, China and India.
- Attention to the internet. He brought e-commerce in-house, modernized it and expanded its scope.
- Make changes. He changed his top team. Eighteen months after his appointment, nine of the 11 members of his executive team had left and a new, fresh crew was in place.
- New management team. He reviewed 150 senior managers. Today, two-thirds of this leadership group have been with Levi Strauss for three years or less.
The retail industry can learn a lesson from this and make changes that support transformation as well.
- Involve management. Do not make decisions without learning from your management team.
- New strategy. The current attitude of most retailers is of despair. Find innovative ways to attract customers.
- New investments must be made. It may take time but a new strategy requires new investments for growth. Beating last year is not good enough.
- Find new markets. The global approach may be a winning solution.
- Pay attention to the internet. Many e-commerce sites are not sophisticated and don’t create an effective shopping experience. Only a few sites remind customers that they have not bought what they looked at and few quickly spell out how to complete the sale.
- Make changes. Make changes in staff and of systems. Systems adopted 20 or 30 years ago may be good, but most likely they do not acknowledge customers demand for speed.
- New management team. Even the most seasoned team needs periodic reviews. I think most retailers have an opportunity to reduce their management team and empower associates.
Levi Strauss is on the way to a good recovery. 2017 is expected to be the fifth straight year of growth. The company now aspires to be the world’s best apparel company and one of the best-performing companies in any industry. In 50,000 doors in 110 countries, it is a global leader in jeanswear. The company markets jeans, casual wear and related accessories for men, women and children under the Levi brand (85% of total volume), Docker’s brand (10%), Signature by Levi Strauss and Denizen brands (5% together).
The Americas account for 59% of sales, Europe 24% and Asia, Middle East and Africa 17%. In 2013, just 3 years ago The Americas were about 64%, Europe 23% and Africa about 13%.
In fiscal 2016 the company reported revenues of $4.6 billion. In the most recent quarter (2nd quarter of 2017), revenues grew by 6% and year to date are up 5%. Europe grew 17% in the second quarter and direct-to-consumer 13%. While wholesale sales were about 72%, it is notable that direct to consumer sales are now 28%. As a result, the company raised its revenue growth to 2-4% for the year. It is a very competitive market, but jeans are here to stay and I am convinced that Levy Strauss will regain market share through international growth and new fashion fabrics and fashion flair. It just may end up that top performer it has set out to be.
