LEVI - Earnings call transcript Q4 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Levi Strauss & Co. Fourth Quarter Earnings Conference Call for the period ending November 29, 2020. [Operator Instructions] This conference is being recorded and may not be reproduced in whole or in part without written permission from the company. A telephone replay will be available two hours after the completion of this call through February 3, 2021, one week after the call for the telephone replay. Please use conference ID 6963016. being webcast the one will the website is replay and quarter call company’s the of be www.levistrauss.com. conference broadcast Internet over a on This accessible for Aida turn Management Risk Levi Strauss call to Relations at like Co. now Director, Shareholder would over I to Orphan, & Senior and the

Aida Orphan

the joining discuss today the quarter results you for call fiscal XXXX. Thank for of us on to our fourth

CEO today’s call CFO. are of and Levi on President Singh, Strauss; me Joining Bergh, Harmit and Chip

this in our of XX-K statements. filed in results cause the our Risk link factors our that differ. on SEC, release We of have financial the posted statements our results obligation with contemplated those be our differ everyone remind our The QX today Form IR on on the update we no materially forward-looking note our are based to Report could that could as investors.levistrauss.com. today’s results also making section of to earnings Please section by this forward-looking site. on can call, complete risks like and on forward-looking Actual webcast assume be statements information found filings which of that for to conference Annual website, call uncertainties. the these of Also particular statements. any Factors to us on today, the review that from to we available We’d involve will call we and the

a non-GAAP our for discuss provided These results. measures today’s directly GAAP are comparable During website. non-GAAP in to not GAAP measures. intended our most the on release financial this financial be are call, we Reconciliations substitute will to earnings measures IR

the to at its webcast replay questions one shortly. turn IR entirety one limit website And now, please in and on Today’s will call on so call a to our be have is like their give I’d yourself call to call for addressed. opportunity being available Chip. the to to this scheduled a Finally, of question over this website time the hour, others is

Chip Bergh

afternoon, us you, joining for Good Aida. Thank everyone, thanks and today.

back the profitable and the proud of Looking all we demonstrated and by well for XXXX, our the challenges of they emerge say our grateful the given protect pandemic teams was of and crises. we how and to unexpected against meet about in this while operating gives created and really acted overall a We stronger for have internal both executed more When that From face the I’m backdrop. and resilience business. The our were pandemic beat year, a we we proud am long-term. also to on our done and to company. hit, other quickly year building people, the the agility We fiscal needed start, consumers year. will our delivered the work great strong scenarios moments, there and the I expectations rest me confidence several uncertainty tremendous

expectations our play heightened our Our our industry our conscious of ability a across that focus to casualization, on have consumer and accelerated move the to our stay. towards are the more ongoing adapt of shifts further such they power changing and Many strategies, the changes consumption Significant our as look sustainability, like strengths. here to of the validated performance the consumers. of brand, strength to

like with Levi’s and By marketing, shareholders: consumers and for authenticity the underpenetrated brand, outsized share outsized and other through market increasingly in in are that for to transforming than and an ever a while diversify our first resonated DTC-first further will are we’re doubling our our of driving down that the jeans our connections on increase grown making has I’ll than contribution retailer; sharpening performance, and Spain. vertical our share with experiences. brand our deeper by and business in operating how global an that categories. value act We closet share digital denim share focus women’s to the key leading in We we has we’ll denim our more things remain growth before unmatched markets strengthening talk to business. physical about drive pivoting brands. in brands; can continuing U.S. leadership And consumers product, maintain third, mindset digitally XXX and mile. we’ve a differentiate by areas; Germany, the further in Europe driving more a things in our France, heritage we fourth, like to leader lead increase in we’ll our market business forward, with second, first, our years. us Going and with

building seeing trends. fit, and our time, men’s on across new establishing was and increased We’re products for iconic demand women’s our in original like are XX% up XXX QX. denim At icons same which the we levi.com

high we’re continue and drive fits seeing growth fashion women’s strength relaxed and rise more newer, our with Our to fits.

in focused bottoms, than significantly growing We’re lifestyle categories of and other share those and remain categories on closet denim underpenetrated.

the We’re a aesthetic Tab and continuing launched recently unisex Red Gen out which weeks. Z-focused collection, Sweats, to casual in sold pilot advance

FARM like this out like We which sustainably-minded like brands brands with bigger we and and In WANG. globe. with brands wear teamed sold with and And Iconic Awake will QX, the year. follow NY later across up Rio street GOLF leading a premium we Balance, [indiscernible]. up instantly New collection collaborated

robust, forward with is Looking Valentino. including collaboration another Miu collection pipeline fashion XXXX, an upcycling Italian house, to and Miu, with our collaboration

without shopping, we new our shopping experience, Instagram ways directly ever live Z Gen brand first with launched with allowing saw products to displayed the engagement, ever on platforms. leveraging audience a purchase leaving the the digital joined which stylist Instagram experience. We Levi’s QX, And our younger In are by in social forces of targeting connections strong launching consumer. especially the the Bitmoji collection we Snapchat

was is stronger example A a and the marketing of this line again spring. making each campaign and focus the other, in product us our great fall It and our company. of brand will be Our work. sustainability values reinforce our

science-based We’re on on targets making progress our climate. industry-leading

XX% than list. and more electricity apparel the in way renewable to use And named owned now facilities our we we companies Carbon XXXX. three Disclosure Project’s by only example, A recently our of on For to XXX% one were operated

innovating chain. continue a and We’re recycled sustainable In sustainability ahead, scaling content. in that too. We’ve Wellthread and been uses And on of cottonized assortment. more drive brought our hemp market searchable July, jeans year practices our supply more denim last the we’ll to throughout mainline to products our line pair

the higher the thinking our overall We an the businesses. stores, margins important improve our The be and will our to other first the us and experiential continue forum equity. experience next-gen smaller stores ROIC average gross an consumer have And now our company than the in will build the DTC part in which our to be door. help stores elevated connect and of five and mainline of opened retail demonstrate e-commerce In engage which with of and DTC strength They’re the the business. growth stores U.S. with standpoint, category DTC expansion. accretive own and U.S., have Second, offer we’re as fourth are brand showcase to and business provides our consumers. along the investments channel of next-gen XX us we our brand for company. from footprint quarter, and Physical acting a digitally-connected we and our to profitability stores accelerate

expanding store our with We formats. space a will wide these more continue capturing retail productive footprint opportunities focus on

allocated this omni-channel above record year, a Our rates rate business now We is basis. year continue and remain out our up build a grew levels to owned fully at on pre-pandemic e-commerce growth from last as will capabilities. we believe XX% profitable

We the capacity enabled consumers additional U.S. sidewalk like with in accelerated store delivery, also of capabilities out new a on been an roadmap, the mobile Store, number which all efficiencies constrained. the stores order scaling increase is rolled line-queuing, During In and and improve experience building in scaled appointment us has We’ve omni Buy stores’ that value checkout, and options transactions. including successfully which implemented been in-store same-day payment we to and to Afterpay, XX% average was for consumer had strategies to delivering transact like when Online, Pick-up our scheduling. pandemic, on

capability to ship-from-store and UK, we in deployment the Europe continue been to Germany, Canada, in plan and Our has expanded XXXX. early

rolling worldwide. We’re our Since loyalty also we’ve out in driving program Europe reached program. members in QX, the million growth meaningful in to X close

XX% growth using We’re programs us beat personalized continues to and and engagement, our our app revenues, value order average by mobile for loyalty enrollments, benefits AI in increased members, recommendations of on product app more enhance offering registrations. access both our to meaningful versus by And achieve to expectations and AI. and helping differentiate opportunities, are In or quarter, QX, frequent product prior app exclusive driven millennials. download and our content, Gen the rate personalized collaborations powered by Z the consumers the XX% early and

of area is and of we’ve made XXXX, way third our areas represented deliver it half. women’s these and was XX% by portfolio to areas represented our are XX%. was which think of DTC our revenues. our XXXX, diversification we to In since revenues. becoming business of XXXX, In to of In continuing for sales Our DTC total XX% XX% as could focus XXXX, growth the be In margins. of business. women’s XXXX, we XX% our progress decade. in total In only revenues. it accretive was next the much XX% total expect underpenetrated as XXXX, XXXX, accounted of tops headed will are in XX% international in goals, that to international is In revenues. share I and In XX% as well In was for longer-term accounted as total achieve XX% two-thirds. and the XXXX, XXXX, on the to

of denim as chinos. that and XXXX from was are our XX% revenues accessories, not other bottoms, categories footwear Another such

was than it grew are we our own outsized tops digital decade, drive that. with categories, By next to In of growth our fourth. XXXX, as comprising sales our about will not the nearly customers and those XXXX, half revenues. our to revenues our this tenth in own digital one-third comprising come from of in we less that other bottoms. to expect both we these a total XXXX, a our half expect get Over And products ecosystem denim and total of e-commerce

on focus and where digital We’re attracting to premium. continue new also we wholesale more more within through consumers diversifying

Our and seen has jean double-digit one Walmart. value Signature number at perform. the selling growth on women’s offerings continue to has Amazon

track Tab brick-and-mortar Our with on out an of for to at And yesterday assortment Levi’s XXXX. announcement limited-edition department ways items. than expect collection, home to the we about to showcase we’re a more roll by And win. and Levi’s going business joint lifestyle But expand brand revenue our be play, our it’s of in traditional less is Red stores total shared we new our also forward. XXX QX, will the where as doors Target to Target which largest of how unexpected non-digital just of with excited XX% it’s in will fall than we

experience, We consumer everything drive our us costs. to are transforming and increase enabling we profitable superior efficiency deliver growth, reduce in digitally a do, more business,

We business optimize continue in and our beyond use planning, of experience, the to consumer scheduling stores. labor and globally Levi’s our AI expand in to scale most the of margins, assortment powering promotions including

digitizing ways our We are of also working.

held brands investing renderings. our photo-realistic process. by samples XD go-to virtual reducing market leveraging meetings, physical with four shorten tools digital in assortments to assortment digitized Our we’re And line

world later lead reiterate inclusive. our look forward our who year. annual to I our this Officer, publish And equitable Before it to as our our and this first data, our to commitments progress to well Diversity, Belonging as we’ll turn Inclusion, want our hired important workforce pay again diversity commitments sharing forward. Chief and will making over Morrison, going I you Elizabeth with data equity representation work. I on We’ve and Harmit, more

Let turn Harmit. it over me to now

Harmit Singh

in heading morning, margin ones and improve down gross XX% to into despite efficiencies. with prior season, Thanks resurgence in expectations and Chip. was you, the in decline on working while to flow mainly to a The optimistic QX margins operating resulting The and QX. continued versus to comparisons of disciplined everyone. very emerge improvement will Quarterly choices productivity generated sequentially cost reshaped structural to I ROIC and driving and We growth, will strategies XX% and P&L prior a profitable accelerate to QX holiday as this outsized our growth. focus significantly closures, costs, revenue to virus ongoing hope double-digit healthy. year both Good strategic in XXXX, are from from continued continue strong in in base our in I’m the year. store of convinced your that quarter and XX% revenue beating Europe. we and had and least profitable of loved capital at have economics safe margin I high digital fourth as despite improve reduction the our all XX% families our with down down very continue dollars reallocating positive adjusted with and we as quarter more And cash we crisis cash remain EBIT company with the mid-teens. investments and generative ROI executing business of

in saw closures Almost continued unexpected third estimate October, January. on was fourth we’re stores through of here. We net these not you we a Europe. $X.XX results, the of to of of closures. to of year-over-year a EPS comparisons our XX% closing about on repeat cost shift the store we quarter into And have will net will stores in of approximately of results The in adverse I beat our my I additional store and detail through otherwise. of revenues today’s published dollars, despite guidance that reference and impact four. As indicate including global fourth points our in the constant our December of in walk decline XX% the I our release, basis growth trends a revenue details XX% comments quarter currency press to all November, Based us seeing our U.S. XX% so those quarter in store closed unless two online decline, amount base

percentage We a benefited the which Friday in Black also point. week reported revenue had XXrd X a by and fourth quarter, year-over-year approximately comparisons

year company Growth by more combined November our of digital Europe from pivoted sites to and e-commerce sites total Total account revenues as we up revenues, XX% of fourth quarter XX% operate of digital than comprise consumer in wholesale quarter total in in XX%. the sales ago. a Our the the the ecosystem, we grew online. demand online fourth accelerated

business e-commerce to XX% four Specifically, grew total doubled quarter a own X%. as revenue of our in and share company’s nearly

primarily Levi’s sales slightly. from drivers. channel reductions the around X% direct-to-consumer down higher structural a sales both board, to was rose we’ve highest Adjusted deliver share of a SG&A I Our million] brands our off-price we the higher sales us intrinsic and quarter, our half health wholesale. the across decline. e-commerce ever recapture lost channel. expanded fourth of increased were as Adjusted business reduced again our enabled and about [$XX for discounts as continued units gross wholesale adjusted margin margin tightened stores. last is We’ve gross XX.X%, and than world the primary prior for year, strong to cost on e-commerce focus e-commerce Gross shared physical incremental has profit And demonstrating margin increases from expanded posted, quarter initiatives. to XX Price again, basis the reduction channels. reflecting the to cost our have our and points the of AURs significantly

portion on our X%, higher DTC adjusted adjusted savings was expectation. quarter, was than the earnings our quarter million, all Other margin costs variable and a areas reinvesting of revenue Fourth $XXX due adjusted were our for beat. per primarily prior $X.XX SG&A technology. namely EBIT than diluted driving higher costs We’re higher expectation, was share EBIT and our to the behind slightly the growth,

e-commerce to November, in and few which quarter revenue The bright share especially [XX%] our in to Americas in nearly in the XX% the third better XX%, the tracking was Fourth we’ve in operating acquired resilience growth a strength company. revenue XX% of grew regions. the holiday. the Andes region’s the October, a accelerated I’ll on finally, consistently quarter And America Now, the business, was quarter. strong, highlights and levels only decline. X% rate full than year grew quarter our Latin the month which the region, of prior U.S. the hit really slightly the demonstrating the three which led the Then above doors. we declined in was a quarter seen. declining November, more Europe our lockdown from to the through region over decline brand slightly the our growth doors closing for rates digital with e-commerce through than of XXX% posted for ecosystem E-commerce and the significantly when in increased we full through of XX%. of growth continue income as quarter, to November growing accelerate XX%. region’s XX% quarterly closed spot

Our brand in the region did us which experience playbook, to brand with team continues demand the the strong the the The confidence COVID marketplace. is by Levi’s grow, Europe share we and equity with should continues back lift, gives popular first snap consumers’ the the in surge denim gain far, to as the brand surge. in getting for the we as after subsides combined the lockdowns that most

region, Asia, declined to significant XX%, as last quarter from reopen. sequential as began a India improvement a

India, remainder DTC full XX% health. prior Excluding to nearly sales franchisees proactively digital was down to the to quarter. The flat Asia year manage high-single in in was grew ecosystem region of XX%. grew the China while digits, inventory as the reduced

brand significant accelerate focus has opportunity We’re sales and our whether growth. have investment a to and high brand Asia increasing on we Levi’s awareness

net to our sheet to able cash At healthy balance management. inventory inventory at disciplined and more year XX% with to Inventories Turning over were year, outperformance prior and of seasons. year-end, carry the X% into below remained revenue flows. than of end composition reserves, the future due

prudently initiatives. increase the And million, we we our over of hit, bar entire was technology which to cash again proud capital emerging $XXX on our through managing $XXX organization yielded original initiative. of a how continued our free budget CapEx while crises flow to prior invest management adjusted cash of free raised XXX as and focused flow particularly cash two-thirds on when accelerate strong year. in million, I’m XX% million quarter, fourth different the pandemic cost high adjusted bringing growth third full-year the while the behind Our working in CapEx reduced to a DTC Full-year we ROI towards went stronger. actions

our AI footprint, we from was locations November, data we doors And team XX expand enabled the processes. expanded better automation added Type in count doors generally internationally We most our first XX and and company organic opened will to SCP store than rents Mexico, much market went total analytics automating acquisition, in year at and cloud-based to rates and implementation We operating digitally the continue year-end greatly done and remotely with efficiency system there. the with team in A enhance at X,XXX. agility our We of ERP had during our pre-COVID. store continued The the and upgrade. another primarily late the live digitizing global in multi-year our and successfully brings bringing

We like Canada. America ever are other close to quarter I’ve what no experienced. with The year next brings starting moving North been a has on a fourth to

proud finished the it through have be with full-year year ecosystem from and We XX%. digital Sales accelerated much to of. our growth of

Our margin. year a own fully generating of on low-single-digit e-commerce EBIT a schedule, basis and now ahead is a profitable allocated is

parity structural expand We’ve basis cost and expect executed as initiatives with million this channel margin capital. head and at business We points delivered in revenue to of expansion growth adjusted us in savings The have and as cost to in XX adjusted gross EBIT above one double-digit track savings quarter coming we margin rent, drove quarter that our company to And savings, We’ve and the EBIT tremendous margins quarter years. around should vendor and enable doubles algorithm. collectively unprofitable the continued growth. strong in in deliver the three levels improvement count, despite of margin XX.X% declines average we XXX in even quarter. working gross invest this four, size travel, and to high-single-digit to only driving in negotiated ultimately in

discuss holiday the our on thoughts take sharing me moment Before ahead, to year results. let a

digital by of a lockdowns December. As with store revenue a down improvements share. combination fundamental of Adjusting as to QX, closures, November growth we the for months holiday and steady December. XX%, ecosystem stronger our holiday were of digital our thus ahead store define than season. We better the closures. accelerated estimate XX%, impact Revenue the impacted the market reminder, much saw market, growing Both we in through holiday and

promotions. the Amazon’s we December took Our period own Prime included promotion. a remains holiday held approach the mid-October strong, Day, tightened a in online following; holiday the earlier pandemic was Americas, And this year, to profitable colorful increasing started which e-commerce shopping Regional holiday through gross surgical in as margin with very as record double-digits for China returned tight of us year discounts to And starting Asia, to in Day who both sales. to back. those fleet made and versus as environment. pay in terms Prime kept the in promotional were with changes we India a December the store in growth And direct-to-consumer prior we growing are

things share I’m I’ll the we’ve in can seen, in thoughts XXXX. quick this We But and action. suddenly some business run unprecedented long-term require all And strategy. for change Now, very environment. events unprecedented and a our this on as confident

near-term the at very one-half taking of planning a Given our visibility, fiscal the year XXXX approach time. we’re low

outlook. and As our we’ll gain visibility, the year more unfolds we update

specifically, this full range with assuming of comparable compared with XX% of the the anticipate based to half where continue improve XXXX. during believe return And of XXXX our markets QX demand expecting first world quarter In as to in the we the earlier Europe. such in of could revenues XX% XXXX. across high-teens down roll revenue brands growth second year, of revenue, be levels half will on dollars China versus to XXXX. and out, constant QX quarter be the the to revenues QX pre-pandemic of or for With XXXX the first underlying there we as terms should And strength quarter conditions happens first respect of to vaccines we’re the above that revenues

was Black be really to XXXX factors: rate had XXXX COVID X the minimal; significant by will QX impacted impact we’re strong the by comparison a adversely wherein quarter the the will of QX growth Friday, addition First, a two fact, which impact adversely lapping In points.

our have closures XX% increased. Currently base our stores of in store XX% store Second, including global closed, is Europe. of about about

these assuming and X points this of will remainder will X store us we growth. QX of through the We’re expect or closures XXXX cost continue points

margin. Turning to gross

adjusted We by the be will is quarter higher price basis COGS XX.X%. and operating international of increases margin business record This a of with healthy with towards shift expect last about XXX gross first saving. year’s incremental points digital, the accelerated driven and combined benefit than our of DTC inventory, being less promotional,

store In took in rate million. the investment structural range savings capital tax our the right around for the to terms AI, go SG&A $XXX Uses take of $X.XX in of the of quarter run estimate include will $X.XX closures. level initiatives, it omni-channel all EPS upgrade]. adjusted analytics, back anticipate initiative. and our around QX $X.XX if cost pre-pandemic We weren’t higher adjusted quarter to CapEx of higher digits diluted data [SAP technology have way like areas dollars, XXXX in EPS first growth our Two-thirds e-commerce, been We to XXXX the we will towards high-single in against of investment $X.XX. would strategic full-year the behind the and first us despite rate

stronger. to mainline plan count, that flow U.S. open pleased dividend in smaller our positive would at to next-gen continued our take XX continue that around the cash with as a XXXX. in the XXX. year. to last XX we above share full-price outside borrowed improve, our will unfortunate, recovering the back visibility of our In debt, around closures reinstating we emerging the be per levels are which good on U.S., based to we lost brick-and-mortar, And control the we dividends respect what progresses to store DTC footprint, the strong we is stores much take in but door to on summary, paydown our international, these on of year call I’m The biggest with payment our and as Most intend opening are We’ll of XXXX, China. announce we quarterly timing way to In and globally. anticipate e-commerce business consider $X.XX our terms doors confidence also the the XX profitable move are If and we’ll share within and really business we that’s pay amount finally, our store of current a portion sales. increasing business quarterly of control. is a trends of improves. now through In

As DTC margins a do levels, our be recovery to with confident to EBIT When reopen. result, pre-pandemic remain profitable stronger, annual more revenue much path about we a business to at will we stronger once XX% expect to and much the XXXX’s other gross recover a revenues stores accelerating driven growth technology plus, we notably in higher by be primarily shift than XX.X%. while strategic This margin reinvest initiative. adjusted

committed profitable that, we’ll from capital to growth shareholders. returning and questions. As your emerge uncertain these it up open and have and now we driving to times, we our With navigate take

Operator

Please Matthew line Thank go Instructions] from comes of you, our [Operator I question Boss the JPMorgan. sir. first show ahead. from

Matthew Boss

Great nice quarter, guys. and congrats on the

Chip Bergh

Matt. Thanks,

Matthew Boss

we in post-holiday marketplace November, I December? And color the increased casualization, guess any about seeing was distribution as digit, guys and following have to permanent the the to crisis? spoken pre-pandemic think basis helpful line, XX the on saw points you’re think trends to, the help incorporate particular, points cost that maybe on annual Chip, of saving that organic gross XX of the secondly, acceleration in basis targets when margin and you remapping us that then near-term, top in larger comments we and you mid-single picture, that the

Chip Bergh

Okay. Both great questions.

the through started, time the the the the fourth were we the business sequential prepared and in period. our pandemic from improvement November-December pleased said holiday we importantly As with in really in remarks, but quarter

really feel progression. about good we that So,

and all really stimulus in middle you about that’s the NPD the in that a We’re we’re probably there of out checks. other since not but the data overall, part going to apparel to seems January driven have that by quarter, sector talk in the indicate seen lift

to in progression digital as that our little But our able the really, real bit this we the the how With may from see positives here out. that think and and pandemic e-commerce it. want through the on algorithm pile trends we’ll and the So, on rest be to a really bit. and we’ll time to more emerge need business, to we positive all pivot respect digest feel little Harmit as sustain the crisis. ecosystem the of about growth lift We digital, plays good a to we

the the that the that the with North and the can end to to be sticking margin much, XX% that diversification good to trends cost a in algorithm the our we feel this back day. growth to XX% our with operating really fact in actions need much see we towards play range algorithm terms exception but – and of shift that levels we’re operating of that get of We’re they going of our see at business. we’re really confident how believe the to growth we’ve translate algorithm casualization, during If is the get growth Star we able into be of continue the actual to sustain may pretty some Clearly, with it we if whether that quicker pandemic as believe And advantage. plays going component we out. that sustain of in we different to pre-pandemic revenue the of when to margin taken progress

premature But about So, change. algorithm to we that say to good think we is it’s the where really feel I going are. growth really,

Harmit Singh

Yeah.

international, women. the to to I is back really And be DTC, helping more on, – more business structurally build seeing shift a stronger, especially business. as norm, pre-pandemic shift going discounting. more digital, we getting to pandemic is margin, structural I’d gross Matt, are as what the we more structural what our much think in The there’s fine-tune

You’ve seen in that bear XXXX. out

You’ve us structurally stronger algorithm. out margin. guidance that if right wholesale what stage the the it’s growth structurally that is then, close question seen our healthier, going point, and bear to business QX would I think in to once we is post-pandemic? continue, we’re trends to are Chip’s on fine-tune costs, we’ll right? stage, structurally, now. And tightening say, our is, or then favor be healthier at But that gross I probably stronger, And which and happens

Matthew Boss

luck. color. great That’s Best of

Chip Bergh

Matt. Thanks,

Operator

you. Thank Saad go next Evercore. from line the of show question I from comes Please our ahead. Omar

Omar Saad

for really bullish premium your power Target or Help strength think to seeing taking Amazon Walmart? margin about leveraging the two next pricing the pricing the first question. reconcile power Help price you’re Thanks. seeing, product elements. and products And seeing and and and quarter, more those in you’re lines also to given Good I also evolving My channels? you the reconcile me going follow-up. Are you evening. one, how brand, around Thank gross increases my you’re you me ask, I do see the that wanted really fact have that? strong, looks brand’s premium sounding we’re for that one then

Chip Bergh

we’re strong optimistic that. brand I’ll I’ve right Okay. now. strength. forward. gross always take – brand margin And we our of indicators and is one do I perhaps think greatest said as margin very health of very, is that go the gross And

more a way talked our march Omar, we’ve our of market, as U.S. market is still a talked added total this intentional a couple U.S. over very Nordstrom, the customers months. total skews our last fleet extensively more very, which do got of about years. – of we we where these on biggest significant months six last we’ve we’ve the the our opportunity doors add doors, and that over focal But evidence couple are These next couple with outperforming like over been intend mainline really elevating by distribution, premium the mainline The to this fleet. pretty smaller our really about we’ve elevate to next stores, market. six the more stores mainline The One in far it clear XXX in believe footprint to in is big wholesale. doors points, before, is

So, about really we good that. feel

pricing up mix So, It be to do and mixed believe really a still of opportunities. got we’ve a X our we the of our couple had back. We’ve haven’t have times will. anything to years Tier two taken you pricing sticking. more last roll product, if over opportunity And business into into seems we better to

our our it we’re in here mixing more more for distribution, remapped eye premium intentional is especially with products on the doing important more us, as mixing wholesale distribution to we So, that U.S., positively positively. an mixing tight, is AUR are AUR. fact Target, very, U.S. the assortment Target very average a than fun on out retailer, the Small wholesale Target even the at the mass going though but inside door is they’re higher

it’s So, the of in premiumize real marketplace. us this pad, it’s helping to And expression you premium when the at look brand. a

and good to pricing AURs drive well. mix. margins about march intentional making and to premiumize we So, And that as gross this through higher that’ll translate really, we’re really feel

Omar Saad

Got it. That’s follow-up. helpful, And one Chip. super then,

what’s about kind business? own how are much a which versus Do about have kind X%, wholesale.com? the similar you you last are wholesale Which you the bottleneck As your of percentage said agnostic debate keeping then, I higher of you you guys thinking of owned e-commerce growing being And or a from one the preference e-commerce faster? was versus quarter. to why? is think think direct-to-consumer, of the

as terms there. even in Some out of of the benchmarks out as brands Thanks. there XX% high are XX%

Chip Bergh

significantly first let we’re, were you ago, Yeah. right we’re where are beyond we’re while we I higher. not their say, is accelerate know that. number of X% mix we mean, with of see a And satisfied a because to it or we do we really look even upfront all, where happy where peers diligently year double other definitely do working me at how is

total it’s total in which digital think at plays looking that ecosystem, to wholesale.com. I and our look We know, pure and you agnostic. the as important somewhat at We have the reporting, includes context. am started

consumer. that relationship direct that, having said the with Although want I

my at other So, buying pick Levi’s. I’d a than Levi.com a of much say, head to I But of the that consumer have places. want buy you consumer one, to gun end the day, put and off rather if

And so, want we rise we to to that. do look the at and the with ecosystem entire We total ecosystem. rise want

site. about to So, program. the on in We capabilities the own new about we’re invest e-commerce talked talked We’ve loyalty our building app. continuing

are to e-commerce higher contribute I going these driving the owned in us to ahead. years things, of think, All that revenue on our

Omar Saad

Appreciate understand Great, Chip. where insights. there]. the for to head [you Thanks

Chip Bergh

Omar. lot, Thanks a

Operator

Thank you.

Our next from from Bob go Drbul Guggenheim Please line comes of the ahead. question Securities.

Bob Drbul

Hey. guys. Good evening,

for and have I you, then one quick Just follow-up. questions two

wondered a from I guess, was in think I more first years And few could robust it like the is, reset I XXXX? is are China one at looking give largely rates just ago, there growth I The these today. the about is on and X% complete want it to days. percentage for if of you you And update see where China, point us of one just talk sourcing just you an the when

Chip Bergh

from the So, now try you both into I’ll from U.S. those how respect to there, imports many And right, several if was X%. and back, States quick just risk any be imports than you’re line China United of people in it take our pretty was otherwise, it trade X% and than With was And mitigating going years to it I’m further, ago. China the less into even are to recognizing or go back X%. if is more go And that. you here.

risks trade-related mitigating a So, other great risks the team has job with from any China. done or supply chain imports

good in there. to completely not really We’re China, done respect we yet. are in place a business our With

results been operated recently. The owned good and here really have We’re progress. strong stores our in making

business Wuhan big our our If XX%. We’ve couple we’re years a stores, and you now of look through is That’s of calling XX% partners. as business them, of to down built beacon was couple a done in ago, XX% company-operated. franchise Shanghai. at these

from closed that we’ve We’re doors. over closed two standpoint. partners than We’ve or the will And years excited about more partners. shifted branding so, do to and/or franchise other XXX franchise a what last

and of work results the really stores not standpoint the Bob. from us. customer of I So time our we us. owned to on hard And and I franchise wish the little have close stores. we’re standpoint of could that better-performing us. I we’re work We some bit But optimistic based this behind some in year have and will by exiting this a operated of transformation kind say the of It’s be it retail still our second yet, front over into in half of getting expect was. still a channel work ahead or year,

Bob Drbul

Chip? Got more, it. Can I in sneak one

Chip Bergh

Quickly.

Bob Drbul

I know.

little quarters? a comeback comfort the that you over anti-skinny when at look talk and next some guys guess, few I clothing, bit, Is casualization you a or are months baggy seeing there’s jeans and the you think benefit can jeans. So, from making something around

Chip Bergh

women’s loose this fast very a very, on past of the sort a line Actually that in we as fit line a loose-fit stores season. off to It’s – Yeah. we and our launched men’s straight now start. both

is we it that So something only not seeing it. definitely are

some away it’s kind the women’s here trend, of is don’t trend I straight we’re the to think months. on is I there’s towards we’re jeans. general I stay. looser business. And in more definitely going think same last jeans And this well a fitting loose casual, of clothes to of in leading over really seeing side the true skinny ever fits and But performing couple extent. think our

Bob Drbul

Good Great. you much. luck. Thank very

Chip Bergh

You talking bet. you, Good Bob. to

Bob Drbul

You too.

Operator

Thank you.

Citigroup. from comes the next Paul question ahead. of Please line Our Lejuez from go

Paul Lejuez

Hey. Thanks, guys.

the Just year, want to or for EBIT XX% talk more. about margin guidance next the

little just on management purchases? curious in your if Targets, of you’re about inventory I’m curious order about need U.S. of hit to I’m of the you’ve terms that of the color kind scenarios, the sales XX%? in outcomes. Walmarts, just get of and world, sure And curious Thanks. department what various they’re you versus that could books Just a Just of would seeing kind minimum manage the customers for range thinking you to revenue thinking and Amazons what’s flexibility model, a just of a to maybe and curious ability the store through about got sense your give level from how

Harmit Singh

accretion And to to margins. continues be I we margin, when we in to gross operating levels, our we of operating what the feel about which on XX%-plus XXXX is, Paul, we margin. delivering combination said that earlier, remain consistent think, a good get

returns our discounting. and You’ve price largely decent number. SG&A, which seen two margin order inventory is the health costs mix, in taken factors, back and is levels, of second at accretion We’ve we’ve core. higher levels what the a margin question largely and customers, driven to higher XXXX say very To is is all similar we’re and from is which combination we’d of is gross lower we’d AURs, the even book a net our is gross to And making. after happen that inventory the inventory investments out driven by your the the the company. It’s the that – view geographic say inventory here. the one by channel the about guided health pandemic

third into already for causing that’s seasonal. as that’s You mean, order in than doors Thanks view the good can it’s the largely November. The don’t order closures. the I the We remarks book, closing – mentioned to the Europe, get carry example, XXXX a sales. season beginning in October. the were about resurgence book, that prepared decline We with we store of season to our inventory. in feel higher to at but I virus levels the end track is

we is the the of really So, strong our product strength lineup brand feel is really and strong.

strong, especially casualization the as So, confident we about this feel from continue. emerging trends

Paul Lejuez

guys. luck, Got it. Thanks, Harmit. Good

Harmit Singh

Paul. Thanks,

Chip Bergh

Paul. Thanks,

Operator

you. Thank

Lorraine of Our Please next question ahead. Hutchinson Bank of from comes America. line from the go

Lorraine Hutchinson

half talked] the the wanted to of Thanks. goal? you of Good I afternoon. [indiscernible] know opportunities half Chip, the tops, about to if other maybe how could just to that over see follow-up rank between years you footwear, just goal accessories, that on [you’ve chinos, you do business. moving the categories, I get

Chip Bergh

upside it’s Well, data though remains I today do I in don’t a we’d market tops. kind of tops X% to tops for I organization a, at us. where diversification clearly drive big throw down on market of XX% I the the And there we in say of put number don’t sizable of we share a where all But opportunity, to jokingly revenues, share we of categories look get the biggest when even can have to goal we half I because out continue think of and buy our is different the opportunities that say, think kind still compete think, scratch now how ways. we way. any you one

talked really opportunity that And us the well. wearing. a that’s as And that And went suit as this the but if goes, capsule, for doing represents capsule we So, what bottoms, be significant continues about upside prepared comes at there. of they’re opportunity in to the fall. look which sweat we non-denim lots are Outerwear really, that kids then, today us well. in sweat wearing kind big of for and did And earlier you opportunity what well. remarks a

on one’s I’m the big the have not us to order of So, because focused one organization which we going five, it. try they’re all parts to priority top through rank for different opportunities really and

for be So – of half but bottoms set diversification business four good the be been closet. last has the And everything we story some will the targets five will in for years. share total are that progress will kind else. the and because be in we’ve if of a these we’ve really – part script, made business and the We the outcome that of our over our talked those, next we of denim years about that our our achieve portfolio it of categories. of half does expand And in it XX years really ambitious in

Lorraine Hutchinson

Thank you.

Operator

Thank you.

question next Sole UBS. Jay from from Our line Please the comes go ahead. of

Jay Sole

ask next-gen to the I want Chip, much. stores. so you Thanks about Great.

would the into quarter outlet think, big the that you time the that like see of you of e-com, be numbers stores talk you XX% versus about sounds stores it next-gen it and and a that full-price that business being full stores. fit the mentioned I see be goal? that’ll Can piece that about and outlet over if the how a there’s price being you business DTC suggests percentage

Chip Bergh

good It’s Yeah. interesting. of question, It’s Jay. a kind

and look today, in Asia towards been mainline business for the our still If the skews businesses very has around our historically world outlet. And U.S., Europe, outlet footprint skews the way. model retail In at heavily more outlet. made here our to you stores, same

in here opportunities so, to U.S., our which is mainline biggest of opportunity. And change this footprint our one is the retail

around believe we our a mean, dozen the they – foot are these X,XXX investment. return deliver we stores, I are and and stores, really X,XXX square and they fleet. them they of of the running couple good up to on large, So, outperforming a And and by store. next-gen smaller-footprint now have world,

degree market white talked the and to mix a to college-age U.S. have in these soon [I [quarter hopefully them, And premiumize ability be] stores, about be have stores the of the the and We assort we all these I alone, huge just to I earlier. U.S. confidence space level. Boston we It we’re smartly But have doors when to using to saying – our you there in wide about execute I high keep mean, think the space a data talking earlier. helps in helps the that in about have science which to door down the assort new where it to market, no we here that are in stores in shift the opening more mentioned sometime may opportunities AURs going I elevate students mainline earlier the million] Boston.

on. And so, that really is the that path we are

Jay Sole

quick Got it. one. And then, maybe just one

On next-gen have go they do of as as to them street stores, the I the ability stores, sort of in types stores, do see mall you locations? mean, different

Chip Bergh

many malls news. in U.S., here the the indoor good We’re is not in which today

will. exposure if they And malls. of stores limited many be these you have stores. in We outdoor street very are kind malls, lifestyle And also level of can to

pre-pandemic of going but relative we’re lease locations, can capitalizing out And very there to A really be where we’re great significantly ourselves that rates really are to we’re it’ll malls. expose go on opportunities focused indoor So, a mix, rates. these stores really to kind but we’re not today on getting anywhere,

Jay Sole

Got it.

so you much. Thank Okay.

Chip Bergh

You bet.

Operator

you. Thank

Exane Please Our line from comes Laurent Paribas. the BNP of go from next Vasilescu question ahead.

Laurent Vasilescu

you November in mentioned just to my do Asia on Thank Asia first me the me, for think slightly think XX%-plus to for it COVID how out start last but we kind impact would anniversary quarter? first it? we about was down Good called question. get it I’m X% for might think quarter year-over-year to that was of quarter? been you of the October Europe wrong to a you the And I if Harmit, here, for right afternoon. to how think up taking like tell Europe have side, Is and as quarter. suggest flip fourth the year’s the And then, way about should on as about that

Harmit Singh

Yeah.

we Europe get started specific of then December, of places January, but this it And had don’t they’re doors December, is business question. probably third have towards because we doors I closed. back XX% different lockdown. have stores the well. where as November math the the think, think fairly I’d I number, good of open. the every We fairly would actually I think we our are at And open. on time, say, closed your close. in you country, different went the

get both started reported quickly. it And you we out double-digit On India and I pretty has know believe, we’ll as sequentially business as If Asia, doors of And XX% business, of we of and have in you things the business get across the closed. terms Europe about ours where of franchise as our we think is come improved. our better, mentioned we growth. December is China

also China and for in than about quarter than you month Asia other think say, if COVID I’d our – So, quarter one no other impact because our and one largely one, China. had

better So, we probably sequentially the a gets as quarters. little think it about

Laurent Vasilescu

very much. you helpful. Very Thank

Harmit Singh

Laurent. Thanks,

Operator

Greenberger comes Thank you. line our I Morgan question ahead. from show Stanley. of from Kimberly go the next Please

Kimberly Greenberger

so you much. and the Great. really through Thank season. particularly holiday Great call, color, good

and thank high-teens. you then say heard I wanted In of, think QX that. about, one puts just Harmit, so I first ask about longer-term margin you down kind the question for So and one quarter, I takes. much to

I in understand what constant dollars? reported You that this want I in said clarify dollars, constant currency? this one the that sure means. that as in what just – and just how for report make first. we’ll see me Is to would mean Let dollars? And Is this

Harmit Singh

dollars where Kimberly, it’s about by today in call-out. revenue are percentage are points think and know if I benefit This dollars. constant the I it’s in good X on slightly Reported think, EPS. should Yeah. is – more currency I benefit us, rates they

benefit So, currency. because reported QX a in basis some on of we see should

Kimberly Greenberger

so It sounds year. about the parity to Okay. for would how get we should the And very wondering back QX, clarification. XXXX it’s then, of like we intriguing. get as this if with in you revenue half this Should think dive in a then, in into margin – you margins, we I’m of level? year. on example, Wonderful. What to for back expect the XQ that think sort adjusted later particularly for opportunities much. Thanks And that And are could Maybe that’s above example, you’ve XQ for above plus. phrased margin. actually target about a XX%-plus margin, XXXX? as out-year go your little Thanks just it bit operating to the

Harmit Singh

Yeah.

curtailment giving good about could tend about indicated we XXXX a SG&A. continue base our we be costs if initiatives The our have long-term going is the back of feel head seasonality are as about, to on that’s think, set go prime think that than we that you in the you in feel not? way I growth, have the we margin. margins pace enhances being talked EBIT the rate rather going QX, so as feel of that do – terms by levels example. levels further, can margins years, number our to And acceleration weaker is the the question primarily of to really is or and will a QX, the XXXX stage, – same why seen that of get revenue virus ugly last margin, getting business invest driven for well and driver just comfortable we And at use margins gross we few we than get doesn’t curtailing The and that structurally things that’s XX%-plus we of of growth about assuming of of structurally of over they QX, base XX%-plus. are to good to higher – feel than for accompanying about EBIT the this why we we be to we gross XX%. a as I be gross and the have QX would QX

the ago, joined me, to whole I’d business you’d a and eight happened e-commerce say, DTC I other was when things XX% years happened. asked and and If then goal of bunch to the get happened

we grow so, to decided the and business. invest And

from is And that’s there we point, feel little one but time. going then so a about cautious XX% getting why to this at good being and over

Kimberly Greenberger

Great you. color. Thank

Harmit Singh

Thanks, Kim.

Operator

you. Thank

comes last Alexandra from Our ahead. of go Goldman the Walvis Sachs. question Please line from

Alexandra Walvis

you so here. question I have much the for two Fantastic. Thanks getting in perhaps for and related.

first the The one on program. was loyalty

be if the more share metrics channel? So, performance to customers, the the those do I of X shot million perspective, you anything that loyalty and know you market they you Anything And you secondly, market superior from any of DTC could on where any that associated you with if up will just in post-pandemic emerge versus and can great. share, frequency for the on that share share potential it thoughts program from where you front market order members. value, mentioned during the seems has higher, engagement, would were then, were share you accelerated wonder on higher pre-pandemic? pandemic, that’s a

Chip Bergh

to Year And New as this, talk to good well. at a I’ll So, Happy take shot you. Alex.

do very it launched in in quarter days. so. We still we’re last have program, in loyalty the members. on or early So, We million Europe X the

X the U.S. We members million X in Europe million have in and

loyalty We program opportunities metrics single But are and to them. do we’ve through couple have some early personalize here using for every member. a the run of we

up loyalty is channels XX% from is Our revenue in transactions Total XX% than lifetime XXX% over the loyalty quarter QX. value was and consumer members’ QX higher shopping two-plus within up non-members. over

more actually be members these loyalty So, multi-channel shoppers. we’re seeing also

got. start go really again, of it’s there. everything trying we’re happy early science we’re with again? to days those and early question personalization kind And to the from we’re of data learnings But and reapply we’ve that power else. was the and learn quickly, second all your So, What using

Alexandra Walvis

share market on thoughts … any Just

Chip Bergh

right, right, Market share, right. right, Yeah.

in – we’re one number So, our biggest one primarily in We’ve brand one women’s our Europe. men’s, number in made I on globally, number women’s business, globally. progress good mean, share

actually U.S., brand. Over year, point. lost our little quarter And I in we’ve share in the the women’s here say, of in last Europe. couple last gained back fell a bit. a business a share critical We the to markets in market decided strength of of We we a share was not promotional. the for because to and very not we to point Old there lost the promotional get maintaining the was Navy just overly that who decided sake very, would go

And ability with And share get opportunities your going we’ve both capitalize have we on gains. when across when share the we’ll and believe last to men’s And we gaining here of got couple share, business. of that the believe declared demonstrated Obviously we coming competitors biggest guy, is of We’re of gain forward. – and this confident to it emerge probability losing but back. is stronger. our number we continue the we’ve as but is women’s we’re we higher a of you’re out the we over Part than can part probability emerging of years. stronger to it weak go think of we share

Alexandra Walvis

Fantastic. you Thank the color for today.

Chip Bergh

Thanks a lot, Alex.

Operator

you and Thank conclude you. participating. Ladies session and today's call. for today’s Q&A conference Thank gentlemen, this

now may day. a good disconnect. all Everyone have You

Levi Strauss & Co. (LEVI) 28 Jan 212020 Q4 Earnings call transcript