Levi's CEO Michelle Gass Talks Direct-to-Consumer Strategy

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Thank you, Harry, thank you Hulu, thank you FX, thank you, Love Story, and more. We want to talk about Levi Straussen Guvey Company's latest results really knocking the socks off investors. The stock is up the most in one year, as the company raised its projections for the year after reporting better than expected quarterly results. They cited strong demand in all regions as the dead and brand steershoppers to its own stores and website. We're going to talk about that

With us is the president and CEO of Levi Strauss and Co. She's also a member of the company's board. She's former CEO of Cole. She spent close to seventeen years too at Starbucks. We've got Michelle Goss here in the Judio. Welcome. It's good to see you. The stock soaring, investors are liking what they see. Where did the momentum come from, and what's really working right now?

Yeah, well, first thanks thanks for having me, and I'm really excited to talk about how we started the year. You know, we are seeing momentum across the board, which is around our strategies really picking up and accelerating. So we delivered nine percent organic growth fourteen percent on a reported basis. We are seeing this across geographies. We're seeing this across categories. We're seeing across genders. Why are seeing across channel?

Why is this happening?

Well, you know it's the brand.

Yeah, it's the product, and it's the execution and all of those things are working. And I got to tell you the team is doing a phenomenal job. We're coming off of a solid year last year and it's accelerating right into twenty twenty six.

Michtill Dennan, though, is such a crowded category, Like I won't go to certain department stores or because it's just too much for me, but I do.

Go to Levi's and I thank you for that.

You're welcome, You're welcome. And I to you coming in my twenty three year old. She's wearing them. That's where she wants to go. You talked about your wife like you are hitting a lot of different demographics. How do you do that? How do you appeal to so many?

Yeah?

Well, I would say it does start with the brand, and we like to say that Levi's operates at the center of culture and we're hitting a new stride with the brand. I mean, the brand has been strong for a long time. Last year it went up a notch. We had this fantastic partnership with Beyonce that moved into a partnership with Shabouzi.

And this year we.

Launched our brand campaign at the Super Bowl and it was the perfect time because Levi's stadium was hosting the Super Bowl and we hadn't been on the Super Bowl in over twenty years. But it wasn't about launching an

And I like to talk about Rosie because here is this.

She was part of Black Pink ninety million followers and growing and we're rolling that right into a collaboration with her in Asia. So that is taking off as we speak. And so this is about launching, like I said, a campaign for the year looking ahead.

We've got World.

Cup coming up that the stadium is Levi Stadium is hosting. We have collaborations. You know, we had our collaboration with Nike and Jordan a couple months ago. We had people lining out the doors to get the special clab.

Michelle. When you talk about these partnerships with celebrities, with the artists, I know each one of them is different, but in general, are they coming to you or are you identifying them and you're going to them? How organic is it?

It's it's it's all of the above. Well so, and it happens organically.

I mean literally, what just at the Brits we had Harry's Styles, Dan all wearing five O ones. I mean, this is about being at the center of culture and the Beyonce partnership that started because she wrote a song called Levi's Jeans but we've been friends with Beyonce for decades, back back to the nineties, or Carolyn Bassett. We're the five seventeen's and you know in Love Story it's heavily featured and sales are up like twenty five percent.

Did that surprise you, like? And when did you first all of a sudden notice, Like we've talked about this on.

Air, the ad pack of this. Yeah, well, the nineties.

We've known about the nineties trend for a long time, and in fact, when you go into our stores online, go into our wholesale partners, I mean that nineties trend is all Levi's is all over it, from top to bottom. I mean one of the things we talk about when you ask about what's working, we talk about our two key strategies, which is about becoming a more DTC forward company and also evolving the brand from being about jeans to head to toe. We say denim lifestyle. What does

But we're playing now in the total apparel space.

Michelle.

Perhaps that's a good segue to talk about the macroeconomic environment and potential disruptions or disruptions you've seen from higher transportation costs as a result of bringing these products from overseas into the US and indeed around the world. What has this macroeconomic backdrop over the last five six weeks done for your business?

Yeah, well, over the last year, I think it's been a really uncertain time. You know, I take a step back. You think about the company LS and Co. We've been around for one hundred and seventy years. We've weathered lots of storms and navigated, and it goes back to who we are as a brand. During times like this, people do we have to deliver, we have to execute, but they really do go to brands that they trust, that they love. We offer quality, we offer a great value, We offer durability.

To date, our.

Consumer has proven resilient. I mean you see that in our numbers. You know, we are bringing them a lot of innovation. I think, you know, if pressures come on the can sooner, when when the wallets get tighter, you know we have to up our game, right, wallets get tighter, we have to work harder and that's what we're doing. We offer great Red Tab right down the middle. We offer Signature by Levi Strauss, which is an awesome value. That business was up sixteen percent. It's in the twenty

Love talking fashion, love talking to the collaborations. I also, though, do love the nitty gritty of like supply chains and what's a company like you that has been around for so long and seen a lot of different market cycles. What is your supply chain and have you kind of spread it around based on what we've seen not just in the last year, but even coming off the pandemic, that reminded us that supply chains can be impacted dramatically when they're focused in one area.

Yeah, that's right.

We have a robust, very diversified supply chain across many many countries. We have a really strong team that is agile and responsive and so and these these relationships with our suppliers go back decades and decades.

So we have tremendous partnerships.

And as we've navigated things like tariffs, everybody has stepped up to help us, you know, determine what the next steps are there, you know, just to put it out there on tariffs. I mean, everything that we've got to the street includes tariff assumptions on call it the original reciprocal tariffs at a higher rate, at that twenty percent incremental rate. You know, there's been recent news of it going down back to ten percent. We haven't baked that

As you were saying.

One question we asked up going cfo Hermeat saying in the last year and the wake of tariffs has been about moving production to the United States. Dates he said, no way, that's not happening. Are you sticking by that?

We are sticking by that.

Yeah, that is an industry that really has shifted overseas. And like I said, because we have these enduring, long lasting relationships, I know we'll be able to navigate whatever's ahead on that front.

All right, So you know a company like you, guys, our whole Bloomberg team is like, ask Michelle, this says, but we're curious about your prospects for reaching ten billion in revenue five years, seven years. How are you guys thinking about it?

We have not put a number out there, but you're a date out there.

Meanton, like, do you think you can get this momentum? And how far can you carry it out? Do you feel comfortable?

Yeah?

What I can say, and we have.

I think it's important to have bold goals, right, So we've put the ten billion, we've put the fifteen percent EBIT. I think if you look at the progress over the last couple of years, take revenue. We came off of seven percent growth last year, that was up from the prior year. This year we're again guiding mid single digits. We just had a blowout quarter at up nine percent. So I think it's safe to say that you can count on consistent sustainable growth and then on EBIT. On profitability.

We'll let you guys do the math. Were but we're content.

I mean, like I said, the exciting thing we are if you have visibilit the strategies are working.

We've made some choices the last couple of years.

We've you know, we sold the Doctor's brand so that we could really focus on the Levi's brand.

And there's so much opportunity.

So certainly fashion is working in your favor right now. But we know the industry is fickle and consumers are fickle. What happens or what do you do rather to make sure that when the trends do change, you move with them.

Yeah.

Well, as the category leader in denim, let's art there, it's our responsibility to fuel the trends. You know, the detam category is growing, it's accelerating, right.

We have more denim in my no serious, my wardrobe that I have in a long long time, and I keep buying.

But I would say, though this, but this evolution to denim lifestyle or I'll say lifestyle head to toe, that's not all denim, right, It is fine if you're buying a ribcage, wide leg pair of jeens, what's the perfect top that goes with it?

Which is going to be different than a low rise.

And so now that we're playing in this broader space, which basically increases our addressable market by fifteen x, we're playing in a one trillion market in apparel that requires focus and discipline. But we really up leveled our capabilities to do that. And you know, if you just take this last quarter, our top's business was up thirteen percent, it's only twenty percent of our business.

So when you think about all that.

Upside, so we now and forty percent of our business is non denim, so it's not just denim anymore for Levi's.

So what is the.

Biggest opportunity or categories that are not yet tapped that could be big for you guys?

Yeah, I would say a couple of things.

First, when we think about gender, women's is not quite forty percent of our business. Last I checked, women's has a big play in the apparel market.

Clause it's a lot bigger than my.

Just saying.

But so there's still that should be at least half our business. So we're expecting tremendous growth there. I was just talking about head to toe. We always will be the leader in bottoms and den and bottoms, but tops. So in our business we sell two bottoms to every top, which by the way, that used to be like five five bottoms to every top. That should be the other way around, minimally one to one. That is all white space for us. And then we have amazing growth ahead

Thank you, thank you, please come back soon.

We would like you well. Thanks for having me.

Yeah, we loved it, President CEO of Levi Strauss and Company. Of course, she is Miche joining us here in the studio