The denim maker's newly expanded collection is on full display at the Levi's store on San Francisco's Market Street. The mannequin is dressed in his trademark denim from head to toe. Black denim overalls paired with a light blue long sleeve denim blouse and a denim cap. The other one is wearing a denim crossbody bag. Blue jeans and jackets line the walls, giving shoppers options to feel like a hippie, rancher, or rock star. It depends on which one you choose.
“There's more than just a bunch of jeans on the wall,” Michelle Gass said this month, days after taking over as CEO of Levi Strauss & Co., as she looked around the store. The selection of tops, which Levi's is producing at a faster pace than in the past, was on par with the store's inventory of jeans.
Gus's outfit that day also served as an example of what the company aspires to be. She had traded in her signature black leather jacket, a staple of her time as Kohl's chief executive, for a dark-wash Levi's trucker jacket and matching '90s-inspired midi denim skirt.
Gus, 55, wants Levi's to be not only the brand you think of when you want jeans, but also the first place you go to buy shirts, jumpsuits and down jackets. Her goal is to bring customers back more often (because people typically buy tops more often than bottoms) and drive them to Levi's stores, websites and mobile apps.
“When we build a store, when we create an e-commerce site, we know that consumers don't just want to buy jeans, they want to explore and shop,” Gass said.
This approach is a key element in turning the 171-year-old clothing store into a true retailer, rather than a brand that primarily sells its products in other companies' stores.
Sales through the direct-to-consumer channel, known in the industry as DTC, rose 11% in the most recent quarter, while Levi's sales through retailers such as Macy's, Kohl's and Amazon fell 2%. The company's overall sales in 2023 were flat compared to the previous year.
It's a tough calculation for Levi's to grapple with as investors continue to expect growth from it. Last year's revenue was $6.2 billion. The company told Wall Street in January that it plans to eventually increase total sales to between $9 billion and $10 billion. No specific target date was set.
But Gus and her senior leadership team have made it clear that the stores and the product assortments they can house will play a key role in achieving that revenue goal. Within six years, the company hopes to derive 55% of its revenue from direct-to-consumer business, up from 42% currently.
“I would really call this company a denim lifestyle retailer,” Gass said. “That’s the main axis.”
Levi's stores aren't new. We opened our first retail store in Spain in 1983. The first facility in the United States he opened in Columbus, Ohio in 1991.
But the bulk of the company's sales still came from chains like Macy's and Nordstrom. Since then, much has changed in the way shoppers buy things. As department stores and malls struggle with the rise in e-commerce, brands like Levi's and Nike are ramping up their own direct-to-consumer channels to better connect with consumers and gain greater control over their brands. It is supported by
Physical stores “allow you to represent your brand and the direction you want it to evolve in,” said Jim Duffy, a retail analyst at Stifel. He says, “In a wholesale environment, this can be more difficult to do because brands are often sold as items rather than collections.”
Levi's currently has approximately 2,300 stores worldwide, including 244 in the United States. The number of stores opened last year was 105, a record high.
“Consumers will buy directly from the brand,” Gass said. “There is an overall trend among consumers to really want a DTC experience, and we are moving into the next chapter where our direct-to-consumer footprint is not yet fully developed.”
Levi's will have to go through some growing pains before it transforms into a company that thinks like a retailer. Gus identified a few. She is Levi's president and over the past year, as she prepared to replace longtime CEO Chip Berg, she toured the company's stores across 15 markets. She has traveled to Asia six times.
From these trips, she saw how Levi's business was becoming more developed in other parts of the world. For example, in India, the company sells one shirt for every pair of bottoms. In the US, that's one shirt for every four pairs of jeans. She wants equality in that ratio.
She also concluded that decisions can be made more quickly. It took her 15 months to develop and deliver the shirt. This is about the same time it takes for denim bottoms, but it's too slow to keep shoppers coming back. The company has hired new vendors and is accelerating its timeline.
At first glance, there are some minor changes. Levi's jeans are shipped folded to match the way other retailers display them, but Levi's stores display them differently. So Levi's store employees had to feverishly refold the jeans. Orders to Levi's stores will now be shipped to reflect how the store is displayed.
“Ultimately, what we want to do is spend less time in the back of the house and more time in front of our customers,” said Steve Cano, Levi's head of store strategy. Cano joined the denim maker in 2022, leaving a 20-year career at Apple, where he opened stores in 14 countries. “And in a perfect world, you would want to eliminate all unnecessary tasks,” he said, so employees can focus on supporting customers.
Levi's focuses on training and keeping store employees engaged using short training videos like TikTok, and leverages artificial intelligence to make it easier for store employees to answer customer questions. (“What are the benefits of Japanese selvedge denim?”). We're also improving our system to notify distribution centers when we're running low on popular items in our stores, so we can help you find your size. The delivery of products from distribution centers to stores has also been streamlined, allowing inventory to be adjusted seasonally.
Such practices are a big deal for retailers these days. But this is the next evolution for a brand that briefly lost its footing. Ten years ago, as young people chose leggings, Levi's faced an existential crisis: increasing the presence of denim.
The company understood that. They make high-stretch jeans, open stores in busy neighborhoods, and like Beyoncé, he wore his shorts with 501-style cutoffs during a performance at the 2018 Coachella Valley Music and Arts Festival. I took advantage of the moment. In 2019, it became a listed company for the second time, attracting even more attention. Last year, Levi's was the best-selling denim brand in the U.S. and around the world, according to data from market research firm Euromonitor.
Inside the company's San Francisco headquarters, dozens of denim pants, jackets, and shirts hang on racks. Levi's chief merchandising officer Dawn Vitale describes the latest range as a “denim lifestyle,” allowing customers to deck out head-to-toe denim regalia. Prices for jeans start at around $60 and go up to over $400 for specialty selvedge denim, with some items from special collaborations costing even more.
The logic is that when Levi's releases a new pair of jeans, there are blouses and jackets nearby that are easy to pair with them and can be presented to shoppers. “This is really an equipment strategy,” Vitale said.
Still, as Levi's expands the product lineup in its stores, its direct-to-consumer business is less profitable than its wholesale business. Gass said he has “a vision” for improving the profitability of its stores and e-commerce platform.
Levi's is trying to cut costs as much as possible. In its quarterly earnings call in late January, the company said it would cut 10% to 15% of its workforce, resulting in savings of $100 million this year. Gass did not specify which roles would be eliminated, but said the company was looking to “reduce the hierarchy within the organization.” He also announced that the company would stop manufacturing 15% of its worst-selling products.
“We are changing the way we work,” she said. “This operating model will seek every opportunity for us to be decisive as a culture.”
Gass said Levi's stores will give the company more direct visibility into what consumers want and the ability to respond more quickly.
Messa Raja, 31, stumbled upon the Levi's store in Manhattan's Soho district while on a business trip from London this month. Being a fan of Levi's, she browsed through their merchandise and purchased her 501 jeans. A few days later, she didn't have sunglasses, so she returned to buy another pair and her Levi's cap in black.
“I stumbled at first, but I came back today,” she said.
She said she was impressed with the variety of choices in the store and the customer service.
Mr. Rajah was the type of customer Mr. Gass and other senior Levi's executives envisioned for their stores, he said.
Back at the San Francisco store, Gus continues pointing out products and explaining how Levi's is expanding.
“As I look around, this is great, but it feels like we're just getting started,” she said.
