Technology and Innovation Powering Levi Strauss Growth Strategy, Says CEO

Levi Strauss began trading on the New York Stock Exchange this morning under the ticker symbol ‘LEVI.’ By mid-afternoon, the stock was at $22.66, substantially higher than the price offered to institutional investors. It’s clear that investors believe that Levi’s can leverage technology and innovation to successfully compete online and in brick and mortar stores.

Charles Bergh, CEO of Levi Strauss, discusses how technology and innovation are driving increased sales and market share in an interview with CNBC coinciding with their IPO:

We Are Denim and We’re the Market Leader Globally

We are denim and we’re the market leader globally. A lot of people as we were doing the (IPO) roadshow said aren’t you guys just riding the denim wave? We’re creating the denim wave. We’ve been driving the category with innovation across our men’s business and our women’s business. We’ve expanded to other categories. Last year we finished with 14 percent growth coming off of 8 percent growth the prior year. The business is really humming right now.

I believe this is sustainable for the long term. Maybe not double digits forever. But we’ve got clear runway for growth across the categories that we’re competing in. We’re building share in our core categories and expanding to new categories. Last fiscal year, when we finished the year our growth was really broad-based. If you looked at it in the categories where we competed we grew every single category. If you looked at it by geography we grew every single geography. If you look at it by channel we grew across wholesale, including US wholesale, which is a little bit of a melting iceberg right now. We grew in our own brick-and-mortar and ecommerce. It was very broad-based growth last year and we’re confident we can continue that.

We Have Built a Very Big Platform for Big Data

First of all, to be successful it does come down to strong brands. Consumers at the end of the day love an emotional attachment with their brand. We’ve recreated that that love for Levi’s. We have built a very big platform for big data. In fact just a couple of weeks ago we announced that we’ve hired a head of advanced analytics and machine learning who will sit on the executive team and report directly to me. We are mining the data that we do collect and really turning it into revenue.

Our strategies are working and one of the key strategic choices that we made seven years ago, shortly after I joined, was to become a leading world-class omnichannel retailer and it is working. The mix has shifted to omnichannel. When I joined the company it was about 20 percent of our business. Today, it’s almost a third. It is faster growing than our wholesale business and we’re continuing to invest in it. Most of our capital investment is going into retail and ecommerce and knitting that seamless consumer experience together.

Implemented New Instance of SAP and Investing in RFID

It (IPO funds) is going to go into continued investment in building out our omnichannel. So both brick-and-mortar retail as well as our ecommerce business and then knitting it together with technology. For example, we’re implementing a new instance of SAP and investing in RFID (radio frequency identification). We’ve implemented RFID across our business in the US and UK and that’s actually really turning into money. Every one of the products in our store is tagged with RFID.

I’ve actually had this experience happen to me myself in our new Times Square store. There was an item I wanted to buy and they didn’t have it in my size. A stylist came over and scanned the tag and she could see that my size was available in the back room. Just two minutes later I was in the dressing room trying it on. A year ago before our RFID that would have been a lost sale. That just wouldn’t have happened. It gives us instant clear visibility to the inventory in our store, both in front of house as well as back of house.

Levi’s Driving Market Share Through Product Innovation

Back in 2013 and 2014, the headlines were the death of denim. It was all about athletic tights and Lululemon tights. It became a throwdown moment for us as a company. We have an innovation center a couple of blocks from our office. We brought our suppliers, the mills that make denim for us, into that innovation center. We understood what women were really telling us by wearing tights. That used to be a denim occasion. They wanted soft stretchy comfortable material that made them look great and gave them confidence. That was what was driving that conversion. So we innovated around soft stretchy comfortable denim which we can now do. We developed proprietary four-way stretch so that women don’t get baggy knees, which is their biggest dissatisfier.

We relaunched our business in the middle of 2015 and we’ve grown 14 quarters in a row and in the last eight quarters at double-digit rates. It has been a huge part of our growth. We were under $800 million just on women’s bottoms about three years ago. We’re over a billion dollars today. We are number one globally with a nine percent market share, but we’re not number one in a number of markets including right here in the US. So I really do believe we can continue to grow at an accelerated rate on our women’s business. There are lots of what I like to call share donors out there for us to build share while we’re building the category.

We haven’t seen any (backlash to being an American brand). This brand stands for everything good about America. Freedom, democracy, and allowing people to express themselves. Authentic self-expression is what the Levi’s brand is all about. We’ve not seen any backlash. None. We think there are lots of opportunities still for us. I am not worried at all about denim. We are denim and we’ll continue to drive this category through great innovation and marketing that connects with consumers and sends them into our stores.