Levi Strauss & Co. (LEVI) reported fourth-quarter results that were roughly in-line with estimates. The company also announced it plans to cut up to 15% of its corporate workforce as part of its plans to build out the direct to consumer (DTC) business.
Levi Strauss & Co. Chief Financial Officer and Chief Growth Officer Harmit Singh sits down with Yahoo Finance Live to discuss the plans.
Singh says that DTC accounts for about 43% of the company's business and that it's "on the way to 55." However, "DTC first doesn't mean DTC only," Singh explains, adding "We work very well with our wholesale customers. We need them to enhance our distribution globally, because our stores cannot be present everywhere.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Stephanie Mikulich
Video Transcript
BRAD SMITH: Ah, yes. The jeans trade, Levi Strauss, saw a return to growth in the Americas in the fourth quarter. But its full-year guidance came in below the Street's expectations. Retailer also announced a restructuring plan that will include laying off 10% to 15% of its global corporate workforce.
Related Videos
For more on the latest quarter, we're joined by Harmit Singh, who is the Levi Strauss & Co. CFO and chief growth officer, alongside Yahoo Finance's executive editor Brian Sozzi. Harmit, always a pleasure to speak with you, especially to get some time off the back of earnings here. First, want to begin with what is driving the business, from your perspective, right now. We'll get into some of the productivity initiative in just a moment.
HARMIT SINGH: Good morning, Brian and Brad. Good to see you in the new year, and thanks for having me. We just reported, as you know, our quarter four results, and talked about the '24 outlook. We exited '20 through with great momentum. Our revenues were up 2%, constant currency up 3%, largely driven by US wholesale inflicting to growth in the quarter.
So US wholesale for Levi's was up 5%, and that was because we took into account all the factors under our control. We were able to fill the demand a lot better. Our pricing reductions on the six fits we took are working. And we introduced a wonderful pipeline of products as we got into the holiday season.
Holiday season, which, for us is-- because we closed in November-- is a combination of November and December, what we call "Nocember," was fairly strong. Up high single-- up low single digits, direct to consumer business up 9%, and robust gross margins. Overall, financially, we reported EPS up 30%.
EBIT margins were up 300 basis points, or up 41%. And Levi's as a brand ended the year at $5.4 billion, a record, and if you go back last couple of decades. And so we entered '24 with momentum. We've been cautious in our outlook. We have a strong pipeline of products, and I'm happy to talk about that also.
Also, we also announced the global productivity initiative, which I can talk about, and that's about making our pivot into a DTC-first company, which is about developing a leaner, more agile operating structure as we become best-in-class omni retailers. So let me stop and pause there and you can ask more questions.
BRAIN SOZZI: Harmit, I-- hang with me here. It's Brian. Good to see you.
I recently got back from a trip to Detroit earlier in the week, and my hotel was right next to a JCPenney. Parking lot was empty, and the mall itself looked like it was straight out of 1987. Nobody was going there.
Does that reflect some of the structural challenges that remain in the wholesale or department store channel, and that's the main reason why you're enacting this restructuring plan?
HARMIT SINGH: Yeah, so our direct to consumer business, Brian, which is about our own stores-- last year, across the system, we opened 105 stores. It's a record, and also includes our e-commerce business. That business has been growing, and at low double digit-- low double digit, high single, across the world. And for example, in Q4, we reported positive comps, both in our stores and across the region. And DTC is now about 43% of the business, on the way to 55.
Now, DTC first doesn't mean DTC only. We work very well with our wholesale customers. We need them to enhance our distribution globally because our stores cannot be present everywhere. And that's why we are the market leader.
To a question about specific customers, you know, it's about engaging customers. It's about engaging consumers. And as we make this pivot to a DTC-first company, we will engage with our customers so that we can work with them and bring to the consumer, end consumer, the same level of experience and, more importantly, assortments that we are winning on our DTC business across to wholesale. And that's where we think being a hybrid player over the long term is probably the best answer for us as an omnichannel retailer.
SEANA SMITH: Harmit, let's talk about some of the trends that you're seeing here from the consumer with that 11% jump that you mentioned in your DTC business. I also saw that 50% jump that you guys are seeing in sales of denim skirts and dresses. You mentioned the product pipeline there just a moment ago. More specifically, what new products do you see driving that growth that you're forecasting here for 2024?
HARMIT SINGH: Yeah, first, shout-out to all our product people and our merchants. And Michelle Gass, who's taking over as CEO because she's putting a lot more focus into product. So the things that we are excited about.
We're excited about expanding our platform to ensure that we have products as the world becomes warmer. So we have performance cool that really works well in Asia. We're taking that around the world. We're introducing lighter denim products, and that is to ensure that people can wear our products through the year. So that's one.
The second is to your point about dresses and skirts. We under-penetrated in the market. And the idea is we, as a market leader in denim, needs to own denim lifestyle. And that's why the introduction of skirts, that's where the introduction of dresses, which is a home run. And we're just getting started.
We are also looking at growing our non-denim business. I mean, our non-denim business is about 40% across all our brands. And we believe that to own the share of his and her closet, we need to expand that. So we're introducing something called a tech pant that you can wear to the office. You can wear if you go to a hike. And that will be rolled out sometime in spring, and then accelerate through the year. And I can go on and on and on.
At the end of the day, the consumer gives us the permission to own a higher share of his and her closet, and we produce great product. And there's no reason why we shouldn't be dressing you, Seana, or you, Brian, or you, Brad, in more of a head-to-toe with Levi's. I mean, I'm wearing the 49ers trucker jacket. We were all cheering for the 49ers on Sunday. And having this collaboration with them, extending the Levi's Stadium naming rights, it's just one of the things that we do as we continue to accelerate and build the brand.
SEANA SMITH: Well, you certainly have got a tough game ahead of you this weekend. And just to let you know, I'm a big fan of Levi's. I've got a couple of jackets. I was just told this morning that the denim skirts are back, so that might be my next purchase there. And Brad's rocking them right now.
BRAD SMITH: I got the-- I got the black jeans on, Harmit.
BRAIN SOZZI: I got the denim skirt on now.
HARMIT SINGH: Wonderful, wonderful. And some of our-- oh, wonderful. See? You guys are our brand marketers. I love it.
I'm not going to ask Brian if he's wearing the Levi's shoes, but I know he loves them.
BRAD SMITH: He's got he's got the socks.
SEANA SMITH: He's wearing the skirt, so I don't know if we want to know any more. All right, Harmit. Always great to talk to you. Thanks so much for taking the time to join us here following your quarter. And, of course, our thanks to Sozzi, as well.