Levi’s: How Levi’s boosted sales during the pandemic and tackled global supply chain troubles

One of the hardest hit sectors in the pandemic was retail. With indefinite lockdowns all over the world, the retail sector saw plunging footfalls and sales. On top of it, the global supply chain crisis has exacerbated the problem for businesses. However, one brand’s sales reports defied the trend seen by its peers in the period: Levi Strauss.
In the last quarter, the denim major earned a revenue of $1.59 billion against an expected $1.55 billion. Harmit Singh, Executive Vice-President and Chief Financial Officer at Levi Strauss & Co, credited the success to diversification and the company’s heavy investment in technology over the years.
In its latest earnings call Levi Strauss said it now sees annual revenue growing at about 6-8% through 2027, which is higher than its previous five-year targets of 4-6 percent%. If Levi’s can achieve such growth, it would push its revenue closer to about $10 billion compared to $5.8 billion in fiscal 2021. For the San Francisco-based company, its direct business contributed about 36% of total sales last fiscal and clocked 22% of revenue through digital means.

Talking about how the company emerged stronger during this crisis, Singh said they led with innovation. Just before the pandemic, the brand introduced its loose fit or baggy jeans. “The comfortable work status with people working from home and the hybrid work culture, which is here to stay, drove casualisation. And just before the pandemic, we introduced the baggie or looser fit, and that just caught on. It’s now 50% of our total volume,” he said, speaking at Tiecon 2022 held recently.
Levi’s got into the activewear segment after acquiring fitness and activewear brand Beyond Yoga in 2021. Diversification in this manner helped the company.
Diversification also helped the company during the supply chain crisis. Levi’s ships products through 20 countries. “For example, when there continues to be congestion in the (US) west coast, but at its peak, we were able to divert supply and get it through the (US) east coast. When tariffs were being discussed with China and we were importing a lot into the US from China, we were able to cross that. And today, we import less than 1% from China. So, we have a diversified supply chain and we continue to diversify and be agile,” he said.
t the same time, Levi’s doubled down on its technology investment in sales and supply chain. Singh pointed out that earlier, the pandemic supply chain was largely a manual function. However, back in 2015-16, Levi’s implemented a SaaS-based technology to automate supply planning. Today, algorithms decide if it is better to ship the product from a store near the customer or from the warehouse.
“We’ve also been implementing a cloud-based ERP system. When I joined the company, I realised we had about 11 different ERP platforms and systems and they were not connected to everything else that was going on. We started down that track about a couple of years ago. We continue to invest and we have now gone live in a hybrid, cloud-based system,” he said.
The company’s journey with artificial intelligence (AI) and machine learning (ML) started three years ago. Today, these techs are used in two broad areas. One is to determine assortments at a store level. Second is to allow fans to upload images of products they like on its website. “It will automatically throw up products that are very similar so you can have your choices. We have personalised offers to our loyal consumers. We launched a loyalty programme during the pandemic and we got about 8 million loyal consumers. I think for a brand like ours, we need 100 million loyal consumers.”
In other uses, the company is leveraging AI and algorithms to do financial forecasting and store-site selection. “We thought we’d cracked all the variables. The one variable that we didn’t think of was the pandemic when all our stores were shut down and it was difficult to forecast. We use it for margin management,” he said.
He agrees with the fact that traditional industries like Levi’s, because of their legacy systems, were playing catch-up with the nimbler companies. This is why the company is trying to connect with younger consumers and quickly launched online payment gateways PayPal and Venmo and connected them with TikTok and Snap.
(The one-stop destination for MSME, ET RISE provides news, views and analysis around GST, Exports, Funding, Policy and small business management.) Download The Economic Times News App to get Daily Market Updates & Live Business News.