Levi’s wants you to rethink your denim shopping

The Levi’s store on Market Street in San Francisco has the denim maker’s newly expanded collection on full display. The mannequins are dressed from head to toe in the characteristic denim. A black denim overall is combined with a light blue denim blouse with long sleeves, completed with a denim cap. Another carries a denim crossbody bag. A wall of blue denim jackets gives shoppers the opportunity to feel like a hippie, farmer or rock star, depending on what they choose.

“It’s not just walls and walls of jeans,” Michelle Gass said as she perused the store this month, days after becoming CEO of Levi Strauss & Company. The range of tops, which Levi’s is producing faster than in the past, was equal to the store’s jeans stock.

That day, Ms. Gass’ outfit also served as an example of what the company was going for. She ditched her signature black leather jacket, which was her go-to look during her time as Kohl’s CEO, for a dark-wash Levi’s trucker jacket and a matching ’90s-inspired midi denim skirt.

Ms. Gass, 55, wants to make Levi’s not only a brand you think of when you want jeans, but also a place you go to first when shopping for shirts, jumpsuits and puffer jackets. Her goal is to get customers back more often (since people tend to buy tops more often than pants) and bring them to Levi’s stores, the website and the mobile app.

“When you build stores, when you create an e-commerce site, the consumer wants to explore and shop for more than just a pair of jeans,” Ms. Gass says.

This approach is a key element in turning the 171-year-old clothing manufacturer into a true retailer rather than a brand that sells its goods mainly in other companies’ stores.

Sales through direct-to-consumer channels, known in the industry as DTC, rose 11 percent in the most recent quarter, while Levi’s sales through retailers such as Macy’s, Kohl’s and Amazon fell 2 percent. Total revenue at the company was flat in 2023 compared to the previous year.

This is the tricky math Levi’s is grappling with as investors continue to expect growth from it. Last year sales were $6.2 billion. In January, the denim company told Wall Street it planned to eventually increase total sales to $9 billion to $10 billion. It has not set a specific target date for this.

But what Ms. Gass and her senior leadership team have been very clear about is that the stores and the range of products it can put there will play a major role in achieving that revenue target. Within six years, the company aims to generate 55 percent of its revenue from its direct-to-consumer business, up from the current 42 percent.

“It really excites this company to become what I’ll call a denim lifestyle retailer,” Ms. Gass said. “That’s the big deal.”

The Levi’s stores are not new. It opened its first store in Spain in 1983; the first in the United States opened in 1991 in Columbus, Ohio.

But the majority of the company’s sales still came through chains like Macy’s or Nordstrom. The way consumers buy things has changed enormously since then. As department stores and malls grapple with the increasing e-commerce world, brands like Levi’s and Nike have responded by strengthening their own direct-to-consumer channels to strengthen their connections with consumers and tighten control of their brand.

“You can showcase the brand and the direction you want the brand to go in,” Jim Duffy, retail analyst at Stifel, says of brick-and-mortar stores. “That can be more difficult in a wholesale environment, where they often tend to sell brands as items, rather than as collections.”

Levi’s now has nearly 2,300 stores around the world, including 244 in the United States. Last year it had a record number of store openings: 105.

“Consumers are going to buy directly from the brands,” Ms. Gass said. “There’s the overarching consumer trend that really makes us want a DTC experience, and then we have this next chapter ahead of us where we’re still really underdeveloped in our direct-to-consumer footprint.”

To transform into a company that thinks first and foremost like a retailer, Levi’s will have to go through some growing pains. Mrs. Gass has identified a few. This past year, as she served as president of Levi’s and prepared to succeed longtime CEO Chip Bergh, she toured the company’s stores in 15 markets. She made six trips to Asia.

During those trips, she saw ways in which Levi’s activities had evolved in other parts of the world. In India, for example, the company sells one shirt for every pair of pants. In the United States, that’s one shirt for every four pairs of jeans. She wants equality in that relationship.

She also concluded that decisions could be made much faster. Shirts took 15 months to develop and ship – about the same time as denim pants, but still too slow to consistently attract customers and motivate them to come back. The company has brought on new suppliers and is accelerating that timeline.

It also makes seemingly small changes. Levi’s jeans were folded for shipping to conform to the way they are displayed by other retailers, but Levi’s own stores display them differently. As a result, Levi’s store employees had to laboriously refold the jeans. Now orders are shipped to Levi’s stores based on how the store will display them.

“What you ultimately want to do is you want to spend less time behind the scenes and more time in front of the customers,” said Steve Cano, who oversees Levi’s store strategy. Mr Cano left a two-decade career at Apple, where he opened stores in 114 countries, to join the denim maker in 2022. “And in a perfect world you want to eliminate all unnecessary tasks.” That way, employees can focus on helping customers, he says.

Levi’s is focusing on training and keeping its store associates engaged by using short, TikTok-like training videos, and is experimenting with the ways in which artificial intelligence can help store associates answer customer questions more easily (“What is the benefit of Japanese selvedge denim ?”). It also improves the systems that let distribution centers know when stores are running low on popular products – a major frustration for customers expecting to find their size. Transporting products from distribution centers to stores has also been streamlined to keep inventory to adapt to the season.

Such practices are a must for a retailer today. But it’s the next evolution for a brand that lost its footing for a while. Ten years ago, Levi’s faced the existential crisis of making its denim relevant when young people opted for leggings.

The company discovered it. They made stretchier jeans, opened stores in tony neighborhoods and capitalized on moments when Beyoncé wore 501-style cut-off shorts during her 2018 performance at the Coachella Valley Music and Arts Festival. In 2019, it became a publicly traded company for the second time, thrusting it further into the spotlight. Last year, Levi’s was the top-selling denim brand in the United States and globally, according to data from Euromonitor, a market research firm.

In the San Francisco headquarters, a whole range of jeans, jackets and shirts hang on racks. Dawn Vitale, Levi’s chief merchandising officer, describes the latest range as ‘denim lifestyle’, where one can be decked out in full denim regalia. Prices for jeans range from around $60 to over $400 for specialty selvedge denim, with some special collaboration items being higher.

The logic is that when Levi’s introduces a new pair of jeans, there is a blouse or jacket nearby that they can present to shoppers that would go well with it. “It’s basically an equipment strategy,” Ms. Vitale said.

Still, Levi’s direct-to-consumer business is less profitable than its wholesale business as it expands its offerings to fill its stores. Ms Gass said it has a “line of sight” to increase the profitability of its stores and e-commerce platforms.

Levi’s tries to save costs where it can. During its quarterly earnings call in late January, the company said it would cut 10 to 15 percent of its workforce, a move that would save $100 million this year. Ms Gass declined to say which roles would be cut, but said the company wanted to “reduce the layers in the organization.” It also said it would stop making 15 percent of its best-selling items.

“We are changing the way we work,” she said. “This business model looks for all those opportunities where we as a culture can be decisive.”

Ms. Gass says Levi’s stores give the company more direct insight into what consumers want and the company can respond more quickly.

Messa Raja, 31, came across the Levi’s store in Manhattan’s SoHo district this month while on a business trip from London. She was a Levi’s lover and walked in to browse and bought a pair of 501 jeans. A few days later she came back to buy another pair, and a black Levi’s cap, because she didn’t have any sunglasses.

“First time I tripped over it, but I came back today,” she said.

She said she was impressed with the store’s offerings and customer service.

Ms. Raja was the type of customer that Ms. Gass and other senior managers at Levi’s said they envisioned for their stores.

Back at the San Francisco store, Ms. Gass continued to point out products and explain the ways Levi’s is expanding.

“I look around and this is great, but I feel like we’re just getting started,” she said.