Jeans Are Thriving | Coronavirus Pandemic
Levi’s CEO on how jeans are thriving amid the coronavirus pandemic
On this episode of Yahoo Finance Presents, Levi Strauss & Co. President and CEO Chip Bergh sat down with Yahoo Finance’s Brian Sozzi to discuss the company’s activity during the coronavirus pandemic, including dispelling the myth of “athleisure” wear affecting sales, the looming uncertainty of the “back to school” clothes shopping season, consumer behavior during COVID-19, as well as future plans for both products and retail and brand expansion.
Transcript
all right welcome to yahoo finance
presents
i’m joined by levi strauss ceo chip berg
chip always good to see you
hey brian great to be here thank you for
having me of course you know what what
you don’t see
on the other side of this uh this suit
and tie setup is
wearing a pair of athleisure pants uh
under this suit i mean this whole work
from home
trend debunk this for us why why won’t
this uh work from home trend
and how we’re all living now why won’t
that impact gene sales
well thanks for teaming that one up
because uh it is a
myth that needs to be dispelled so i i
actually
i’m gonna read from some notes here but
um you know the if if
we read data all the time and if you
look at the data
for what consumers are wearing from the
waist down
non-active apparel non-active apparel
is still 70 of all waist down wear
and of that denim is about 50
of it okay so the total denim category
is about 30 of all apparel bottoms
if you will the the things that you’re
putting on your legs and your butt every
single day
denim is about 30 of it men’s genes
and women’s genes are both bigger than
athleisure
and um and then the other thing is
during the pandemic we’ve run research
uh around the world on a regular on a
routine basis and we’ve been doing this
long
before the pandemic called who what
where and we track
what people are wearing and in april
50 of the people globally around the
world
the peak of the pandemic were wearing
denim
the other 50 were in pajamas athleisure
and other things or nothing and
um uh and every single month since
april uh the trend has been more towards
typical wear and denim has continued to
grow
and those other categories pajamas
athleisures
and other things have declined as people
are going back out again
walking the dog or going out and
shopping and doing those kind of normal
things so
um the final thing i would say is within
denim
we are absolutely the category leader on
a global basis we’re number one in men’s
we’re number one in women’s around the
world
and here in the united states we’re
number one in men’s
with uh 24 market share and according to
npd which tracks the industry
uh we’re two times bigger than the next
the next largest brand so
we define denim we are denim uh around
the world and denim is still
importantly bigger than the athleisure
trend
chip i can assure you i’m not the one in
that nothing category i am wearing stuff
every single morning when i’m doing
these shows
but how i believe that probably
underneath that suit and tie
face down which we can’t see is probably
or levi’s
well what what standard fair enough what
do you usually say in this business
no comment or decline to comment it’s
clearly listen we’re gonna be working
from home
if not for another year another two
years how what’s the bottom of the
future look like for liba
levi’s are we looking are you thinking
about putting elastic at the bottom of
your jeans
i’m not sure but how are you thinking
about it well i mean
we’re very focused through this pandemic
and you’re right we don’t know how long
this is going to go but
you know my motto is control what we can
control focus on the controllables
and then plan for the worst and hope for
the best and and we’re continuing to
innovate
through through through the pandemic um
we’re continuing to launch new products
um we’re launching a whole new line of
sustainable products coming out this
fall
with marketing around sustainability too
which is huge
right now and uh the timing couldn’t be
better
um so we’re gonna continue to innovate
the trends are moving towards looser
more comfortable uh jeans you know so
the trend had been over the last five or
ten years and both the men’s and women’s
side of the business towards more
tapered
slimmer skinnier fits if you will the
trend now is moving away from that it’s
a white space that our designers saw
we’re moving into that
and because we are so big in denim we
really can define the trends so that’s
that’s kind of where the puck is heading
um stretch and comfort will always be
important it started on the women’s side
of the business but it’s gone to the
men’s side of the business and stretches
in about
70 percent of our men’s product today
do you think the pandemic has changed
how consumers view consumption i’ll use
me for an example i have spent the past
two months
emptying out my closet and i’m a big
jeans fan i own tons of jeans
but maybe i don’t need a new pair of
jeans
it absolutely has i mean we’re going to
see we’re already seeing
a dramatic shift in consumer behavior
because of the pandemic
and one of the big changes is this
notion of conscious consumption
um conspicuous consumption is out the
window i think consumers have finally
gotten on to the fact
that if you go to fast fashion and pay
four dollars for a t-shirt and wear it
three times and throw it in
the garbage and eventually it goes to
the landfill that a that’s not a good
value and b
it’s not good for planet earth and the
trend is much more towards
upcycling recycling and buying product
that is truly quality that is
multi-purpose
that you can wear for a long long time
and we think these trends really play to
our
advantage i mean we sell vintage levi’s
in many of our mainline doors where
we’re charging a premium for a vintage
25 year old trucker jacket
versus a brand new trucker jacket
and the young kids today they’re going
into thrift stores
buying their clothes taking pictures
posting it on instagram and a week later
they’re up cycling it back up
onto thread up or one of the online
thrift sites
so it’s definitely a trend that we we’re
seeing i think we’re going to see
smaller closets we’re going to see
consumers buying much more
higher quality more versatile products
and they’re going to go to the brands
that they trust and that
all of that plays to our to our strength
and our advantage
one thing out of your control chip is
what we’re seeing in the retail sector
with these department stores you have
lord and taylor you have a lot of brands
uh going buzz and i know you’ve pushed
more into your own controlling your own
real estate your own
uh retail stores but when you lose a
department store and you lose them
in chunks that has to have some impact
well
um you know our strategy for the last
nine years has been to pivot to direct
to consumer and i think the pandemic is
going to accelerate that shift
we’ve doubled down on our e-commerce
business through this pandemic
um you know we’ve got a strong
e-commerce site that business was up 25
in the second quarter was up 79 in may
the last
the last month of the quarter and that
trend has continued
um and and we run 3 100 retail stores
around the world so we are a retailer
and we’ve been pivoting harder to retail
when i joined the company nine years ago
our u.s wholesale business was 48 of our
total
global revenue today it’s less than 30
percent
and you know now the big retailers that
are financially challenged they’re going
to be cutting from the bottom up
and so the majority of our business and
all of these big retailers are done in
the top doors
and and that’s where we’ve been focusing
um the bottom doors are
less contribution to their business
which is why those doors are getting
closed
it’s less contribution to our business
and we think that we’ve got
enormous opportunities still with some
of our biggest retailers
to give us more space to present the
brand more as a lifestyle brand which is
how that brand
how our brand comes to life in our own
stores you know so more tops more
trucker jackets plenty of opportunities
for us to continue to grow
share and help them drive revenue growth
in their stores
and so there’s plenty of opportunity
there and then there are some white
space opportunities for us with some
other retailers that we’re also working
on so
but the pivot now is much more to our
own direct to consumer business
where we can really control the brand
what’s your best guess on how back to
school uh will play offer for levi’s
it’s always an important time for the
denim
replenishment cycle it’s it’s been less
and less important over the nine years
that i’ve been here you know
back to school used to be a moment it
was a week or two weeks when every
retailer ran
sales and people had to rush out and buy
their apparel before school went back
now kids want to wait until they see
what the cool kids in school are wearing
so back to school is stretched to a
four six eight week period of time that
that extends all the way through
september
but i think it’s going to be muted i
mean a lot of schools aren’t going back
my daughter’s school is going to start
the school year remotely
and uh and so i do think it’s it’s going
to be a muted back-to-school season i do
think there will be some back-to-school
opportunity but it’s going to be muted
and chip before we let you go this is
your
we’ve talked a bunch of times in the
past but this is your first time i think
appearing visually on yahoo finance and
what i i our viewers viewers may not
realize you’re the guy
that created the swiffer you spent close
to 30 years at p g
uh what have you what has been your take
on the pandemic and
the consumption of cleaning products you
have to be watching this
well i mean a very good friend of mine
ben odor just uh
just stepped down as ceo of of clorox
and he’s had
an amazing run he’s also a png alumni
a terrific a fine guy and um and
a good friend and he’s had an amazing
run at clorox and you look at what the
clorox business has done
and and their business that’s a lot of
it and
uh so it’s been really good for cleaning
products
png also had a terrific quarter this
packs past quarter i think their stock
is at a record high right now
and uh you know so it’s been really good
and that’s one of the things about the
about the pandemic it’s been terrific
for some companies
and it’s been very very challenging for
others but we’re all in this together
we’re all facing the same dynamics we’re
facing the same pandemic and health
crisis
the economic fallout but that is
associated with that and
and now you know all the racial and
social injustice issues
so every ceo across every industry is
dealing with
the same the same issues um but i do
think coming out of the pandemic they’re
going to be winners and losers
and in our industry we’re very very
confident we’re going to come out of
this stronger
we are going to be one of the winners
our balance sheet is really really
strong
the levi’s brand has never been
healthier and we’re continuing to
connect with consumers
even in the midst of the pandemic and
you know chip before we let you go you
have not hidden your desire to
potentially buy more real estate
potentially maybe even look at other
brands you’re sitting on a lot of cash
we are sitting on a lot of cash um
they’re they’re
the crisis creates an opportunity and
we’re not going to miss any
opportunities that happen to come along
we’re one of the few retailers that are
still at it you know we are still adding
stores
and you know the commercial real estate
market is going to get devastated by the
economic fallout of this we’ve talked
about all the bankruptcies there’s going
to be good real estate that comes
available
and we’re on the hunt um we are we’ve
announced we’re going to add
70 stores this year we’ve we’ve done
about 30 at this point so
um and we’ll continue to add stores and
and there’s a great opportunity to find
really good real estate
at reasonable leases right now and we’re
not going to miss that opportunity
but crisis does create that opportunity
and and we’re going to
pounce on it in every place we can
all right let’s leave it there levi
strasio chipberg always good to talk
with you and i know you’re wearing a
pair of jeans
on the other side of that camera i
absolutely am
not just any jeans apparently all right
take care thanks a lot brian good to see
you
