Levi Strauss & Co – Reliance on Third-party Retailers &

Portfolio Overview – 27 October 2021

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Specialist:

Title:

Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst

Edward Lara (EL)

Former Director, Merchandising at Levi Strauss & Co

Agenda:

1. Lifestyle branding and category assortment for Levi (NYSE: LEVI)

2. Third-party sellers globally and margin consistency issues

3. Differences in channel choice and consumer behaviour between men’s and women’s categories

4. Distribution strategy – D2C, wholesale and digital

5. Promotional activity and pricing power

Contents

Q: Could you give a high-level overview of the US apparel market as it relates to denim and the rise of

lifestyle brands?

Q: Is there an advantage to distribution that may put a company in a better position to manage inventory? 4

Q: What standout categories do you think are leading growth that weren’t before? You mentioned demand

for denim is still pretty strong, but are there any other subcategories such as T-shirts where there is strong

consumer demand?

Q: There is a higher replenishment or higher volume of inventory when it comes to consumer demand. How

does that change across channels? Consumers are expecting higher prices. Has there been a shift in volume

to outlet channels?

Q: How do you plan in that environment where you have these 2-3-month delays in shipments and you have

the risk of missing whole seasons?

Q: Could you give a high-level overview of where Levi Strauss is really leading the denim category? It seems

like denim continues to be strong, but what are the category leadership positions and where is the company

aiming to be the next leader?

Q: Has there been a fluctuation in price activity throughout the tiers, where some products are in tier 1 and

running a promotion would expose customer to this higher-quality denim, eventually moving them up to a

higher tier pricing?

Q: What are the different channels that men are primarily shopping through? Are many going into the

wholesale channel and getting in their denim, or is there strong appetite or volume through retail for men’s?

How does the buying behaviour differ between men’s and women’s across channels?

Q: You mentioned maintaining the consumer perception or brand affinity among the younger consumer. It

seems like a lot of companies such as Tapestry, Michael Kors or Coach tend to fall out of favour. Could you

discuss some of the tactics that Levi’s has implemented to maintain brand affinity among men? Are there any

parallels across collaborations relating to brands such as Supreme or these other streetwear brands?

Q: What are the historical demand trends for women? Is it largely spurts of demand or growth where, like

you said, they may see Beyoncé with a certain style and then it sells out such as at Coachella?

Q: Who’s more price-sensitive between men’s and women’s?

Q: It seems like women are much more up to date in cycle and the overall nature of how many of these

brands and retailers work with their pricing vs men. Is that the case?

Q: What is Levi’s overall competitiveness in the women’s category? You discussed some of the marketing

tactics used and the reintroducing of styles, but how does that stack up against the industry? There are so

many new entrants and small D2C brands innovating across every category. How much competition in

denim is there for D2C new entrants?

Q: Levi’s e-commerce seems like it’s still pretty small compared to other parts of the business, whether it’s

wholesaling or retail, company-owned and operated. Why is it still so small? Is there an e-commerce

component in the wholesaling front?

Q: Is Levi’s able to push higher tiers through some of the digital channels vs traditional retail?

Q: What are your thoughts on Levi’s success in Asia or lack of explosive success in other brands, where it has

essentially been relying on Asia sales?

Q: What should we monitor this holiday season and Black Friday as it relates to Levi’s ability to meet supply

or demand vs other competitors? You mentioned some of the laser factories in Mexico. How does that stack

up against Wrangler or Lee which are pretty global?

Levi Strauss & Co – Reliance on Third-party Retailers &

Portfolio Overview

Transcription begins at 00:00:06 of the recorded material

NH: Welcome to Third Bridge Forum’s Interview entitled Levi Strauss & Co – Reliance on Third-party

Retailers & Portfolio Overview. I’m Nyree Hinton and I’ll be facilitating today’s Interview with Mr Edward

Lara, former Director of Merchandising at Levi.

Edward, before we get started with today’s Interview, please state I agree or I disagree to the following

statement: You understand the definition of material non-public information and agree not to disclose any

such information, or any other information which is confidential, during this Interview.

EL: I agree.

NH: Thank you, Edward. Could you start by giving the audience an introduction to your background and

various roles you’ve held in the industry?

EL: Pretty much, I started my career at Macy’s and I worked there from a Buyer up to a VP of Merchandising,

and I oversaw all of men’s designer, specific young men’s classification, denim, as well as collections. Then

from there, I was recruited to go to Levi’s as Director of Merchandising for the US. In my role, I oversaw all of

the full-price stores. Levi’s is broken up between outlet and then stores and then e-comm, so full-price stores,

e-comm and then outlet, and so I was in charge of all merchandising for the US for all the full-price and then

e-comm business. My counterpart I worked with closely was in charge of outlets, and then obviously we

worked with all the divisions of Europe and Asia as our counterparts as we would always buy globally, what we

were each doing in each of our regions. In that role, I ended up growing the e-comm business, because it was

very small when I arrived. It also became much more edited and focused. At the same time, then, I also was in

charge of opening up new flagship locations like the Times Square store and the development, really, of full-

price business, and then was able to also work with the team on marketing, etc. After that, then, I was

recruited to go to Tailored Brands, where I’m at now, in charge of sportswear for the US and Canada.

[00:02:41]

Q: Could you give a high-level overview of the US apparel market as it relates to denim and the rise of lifestyle

brands?

EL: We’ve been on a big roller-coaster right now of how business has happened from pre-pandemic to

through the pandemic to where we are now and where we’re forecasting. Really, what we’ve seen in the

industry is a return. What we call the power brands, the heritage brands are doing extremely well. There’s a

return. Obviously, pre-pandemic the industry was already going very casualisation, was already on its journey.

Then, obviously, everybody working from home continued that trend, but then it got readjusted to learning

how to buy everything online and then back to returning to the stores. The industry has been hit pretty hard

with supply chain issues. At the same time, there is a lot of business demand out there. Overall, the lifestyle

brands have done very well, especially those that have diversified and their supply chain has more flexibility,

but the demand from the consumer is, again, continuing that journey of looking for casualisation. At the same

time, they are returning back to going to events and then still dressing up, but there is that combination of

dress-up and then the casualisation. Those two areas, for consumer demand, have been very, very strong, but

it’s really now about chasing inventory and getting inventory. I think all retailers out there, whether a brand

has wholesale business or DTC, are challenged to get inventory right now and be positioned well for the

Private and confidential 3

holidays. Overall, there has been a huge return back to denim. That continues, it was what was happening pre-

pandemic, and then now business overall for denim brands has been very, very strong as consumers are either

returning back to the office, back to work environments, or working from home.

[00:05:21]

Q: Is there an advantage to distribution that may put a company in a better position to manage

inventory?

EL: Absolutely, yes. You really need to have your factories and where you’re sourcing, you can’t be very

limited. You can’t be in a handful of countries, you need to be well-diversified. You need the flexibility of

having production in South America, for example. Especially in Central America, it obviously cuts down on the

ship times, you don’t need to get a vessel. For those companies that have business, more resources to source

from closer have made a huge difference.

[00:06:28]

Q: What standout categories do you think are leading growth that weren’t before? You mentioned demand for

denim is still pretty strong, but are there any other subcategories such as T-shirts where there is strong

consumer demand?

EL: I’d say activewear has been extremely important in all of the tops categories, but the category that has

really worked is the athleisure, the comfort, both. There’s comfort and then there’s athleisure. The athleisure,

the Lululemons of the world, Nike, all have given the consumer what they want, comfort at home. To be able to

still feel comfortable yet cosy yet have that lifestyle of active has really worked and that section of the business

has been on fire. On top of that, denim has continued to grow, but it’s really the basics of a sweatshirt, the

basics of a denim jean, basic outerwear. The return of needing those things has really taken off faster than a

normal steady replenishment business, and, again, what is helping the industry, that there is less promotional

activity now because there is less inventory. Inventories out there have been exceptionally high two years ago,

and inventories now are healthier, in the sense of there isn’t this overproduction that now the consumers know

that they can get such a good deal on. They’re not expecting the 50%-offs, the 70%-offs, the USD 19.99s, the

USD 29.99s. That has now changed to being much less promotional because the consumer isn’t inundated

with this glutton of inventory in the stores that retailers need to get through to be able to turn the inventory.

There’s definitely this direction of being able to turn faster the inventory because there is less inventory. At the

same time, there’s still a bigger demand, and the demand from two years ago, because everything is really

being looked at as two years ago, not last year, obviously, because of the numbers of last year because of the

pandemic. When the industry is really talking about last-last year, that’s the comparison where your inventory

levels are at this point.

[00:09:33]

Q: There is a higher replenishment or higher volume of inventory when it comes to consumer demand. How

does that change across channels? Consumers are expecting higher prices. Has there been a shift in volume to

outlet channels?

EL: Outlet business is still exceptionally good, so it hasn’t taken away from outlets, but whether it’s outlet

business or full-price business, discounters, everybody doesn’t have to go as aggressively deep on a price point.

For example, if the jeans were being sold at USD 34.99, they can be USD 39.99. It’s not this huge shift, the

USD 39 jean now became USD 59, it’s a gradual increase where it’s helping margins but, at the same time,

future goods are starting to become more expensive. It’s going to catch up with the margin part of it based on

where we are today. It’s helping pay for those costs of having to air stuff, it’s helping to pay for the extra cotton

prices, it’s helping to pay for the vessel that now is costing more to ship it to get here. That part of it, again, it’s

Private and confidential 4

not this swing of a 40% increase, it has been a gradual increase that, at the same time, that promotion, that

coupon isn’t being used as much. Even if you look across the board, the discounting of big promotions in-store

has lessened. The online presence, again, it’s not that it’s gone away but it’s lessened, so instead of five days

out of the seven that it’s being on sale, now it’s three days. That’s where I mean, where, because there is less

inventory, you also don’t have to give it away, and during the pandemic it was like, “Uh-oh, there’s no

business,” and everybody dropped prices even lower. Then, now, inventory has picked up. Even though there

are a lot of late shipments, inventory was en route, so inventory is arriving. In certain classifications, it might

be late getting here, meaning this should have been in August, now it’s coming in October, but, at that same

portion of it, those values of what the cost is and what the retail is, they’re both going up.

[00:12:29]

Q: How do you plan in that environment where you have these 2-3-month delays in shipments and you have

the risk of missing whole seasons?

EL: I think what’s been riskier is the fashion, so there are two things. (1) It depends on where a company has

their factories. (2) At what point do you say that the supply chain is more about basics than it is about fashion?

Fashion tends to be what’s running late. The basics like denim were already pre-bought, they were bought

earlier, they were on replenishment cycles that helped facilitate knowing that it’s probably only going to be a

couple of weeks late vs fashion is going to be 1-2 months late. The category itself, and now everybody is

showing inventory for next year’s fashion much earlier. Where some vendors would show six months earlier,

everything is now maybe nine months, or those that were nine months are now doing it a year out. It definitely

changes on the category. Outerwear, for example, takes longer lead times, and so much more tailored things

take longer. What is good for Levi’s is that they have, and they’ve invested on this pre-pandemic, a lot of

collaborations with their factories of where they have the laser printing machines that are able to do custom

fashion denim, and then they have inventory of certain styles that then they can react to and then be able to

cut much, much quicker. When I was at Levi’s, I went to their factory in Mexico. More production is going

there and that’s quicker to get. That’s a benefit for them to be able to utilise that, give more of the production

to Mexico that they have great relationships and the factories are very state of the art, and especially with

those laser machines that also are able to get some of those fashion styles out more quickly.

[00:15:01]

Q: Could you give a high-level overview of where Levi Strauss is really leading the denim category? It seems

like denim continues to be strong, but what are the category leadership positions and where is the company

aiming to be the next leader?

EL: I’ll break it up between men’s and women’s, in those two big chunks. Starting with men’s, the big leader

has always been men’s bottoms, and men’s bottoms, obviously they’re the leader in denim. Where they have

an opportunity is in non-denim, and there are a lot more players in there, whereas in denim they own the

lion’s share, they’re the number one in the market, and then there’s Wrangler and Lee. What they’ve also done

is to also create three tiers of denim, and this both applies to men’s and women’s, it’s where they break it down

to tier 1, tier 2 and tier 3. You have to think of the bulk of the business is done in tier 3. It’s like a pyramid. Tier

3 is what you go to Macy’s and Kohl’s and you can find in their outlets. It’s all the red tab label. Then there’s

the premium, which is tier 2, and ,if you think about it, it’s the price point, basically, of a USD 79 jean and up.

They put more work and structure into the jean, plus the Levi’s label is in leather vs the paper one on the red

tab. That becomes your USD 79-100 jean, becomes their premium. That’s for their own retail stores as well as

like a Nordstrom. Then there’s tier 1, which is their Made & Crafted, Levi’s Vintage Collection, Levi’s

Authorised Vintage. Those are their price points, basically, USD 195 and up, and that’s their premier line.

They’ve broken into three tiers. Again, it’s really about price point. The lion’s share is done, obviously what you

think of all the wholesale business and the outlet business. They’re basically USD 39.99-69.99. That’s the

lion’s share of the business and it’s part of their tier 3. That business has been more of a maintain business

because they already have the lion’s share of that business, so it’s been harder for the growth to happen there.

Private and confidential 5

At the same time, in men’s, other than the taper and the athletic fit, there hasn’t been really much newness,

and both the taper and the athletic fit are not new. They’ve been around now for four years. Whereas in

women’s, there’s always a new fit, there’s a new high rise, there’s a new ribcage, there’s a new wedgie. There’s

always something that helps drive the women’s business in fit. In men’s, the looser fit, they’ve really been

trying to push now, but it’s not new, it’s just bringing it back to what they’ve had. Where there has been growth

in is in comfort and in stretch, but, again, it hasn’t moved the needle where, in men’s denim bottoms, they

haven’t been able to grow double digits, where women’s certainly has. The replenishment business in men’s

bottoms is very good, so it’s slightly better than a maintain business, but it’s much harder growth for them

because of, again, if you think about it, lack of newness. Men stick to usually the same fit that, once they’re

comfortable with, they keep buying it. They have done a much better job of adding more stretch to their jeans

and being more flexible, in that sense of a four-way stretch, to be able to go for that comfort level that the

consumer is looking for.

Where, in men’s, their growth has really happened is in men’s tops, and it’s really about fleece, sweatshirts,

hoodies, as well as their graphic tees. Their graphic tees and the logo has been really strong and they’ve been

able to really capitalise on the hip factor. I think that Levi’s has done a very good job of really marketing to

both the youth consumer as well as to the (? 20.28) of their heritage and going after things that matter to

them. Similar to Nike, they’re very good at their marketing, and that part of it resonates with the heritage of

the brand that really is able to make sure the consumer is connected and still relevant. Some of their fashion

might be really useful, but it’s appealing to that young customer so that they become a customer for life with

them. They do a very good job of that, again, back to the tops categories, the graphics, the tees, but they still

have a lot of opportunity there. Where they own the market share in bottoms, in tops, it’s still very minuscule

as a percentage of the market. That, for them, is a continued opportunity. They’ve done leaps and bounds in

the trucker outerwear piece, their trucker denim jacket has been growing year after year. They had, I’d say

maybe about four years ago it was their 50th anniversary of the trucker, they made a big deal about it. At the

same time, they do a lot of customisation, which makes a reason to get another trucker, so they’ve done a very

good of that, and also in market share on that as well.

When you come to non-denim outerwear, that’s where they struggle. They don’t really have a presence there.

The product that is licensed to G-III Apparel, it does have a wholesale business, but it is not a category that

they’ve internally done as a strong category for themselves. Overall, tops is the opportunity for men’s. Before I

go to women’s, is there any question on men’s?

[00:22:41]

Q: Has there been a fluctuation in price activity throughout the tiers, where some products are in tier 1 and

running a promotion would expose customer to this higher-quality denim, eventually moving them up to a

higher tier pricing?

EL: Normally, consumers don’t move tiers, so the retailers will not move a tier. I’d say the only crossover

might be that Macy’s would like some of the tier 2 products that Nordstrom has. Other than that, there’s really

no crossover. What happens is it’s more within the tier. For example, and it really happens in tier 3 because

that’s your opening price point, that’s the bulk of your business, but where denim used to be the USD 59.50

that got promoted at USD 39.99, now it’s being promoted at USD 44.99. Again, the retails have gone up and

the promo prices have gone up, but it’s, “Okay, now instead of a USD 59.50, could you do a USD 69.50

programme?” That’s where it is, but it’s still within the tier. There’s very little crossover because that’s how you

separate the accounts. At the same time, the tier 2, wherein it becomes the USD 80-100 jean, that price point

really is geared, as I said, the example is really Nordstrom and speciality stores and their own stores. Within

that, people won’t jump to a USD 195 jean.

Private and confidential 6

[00:24:48]

Q: What are the different channels that men are primarily shopping through? Are many going into the

wholesale channel and getting in their denim, or is there strong appetite or volume through retail for men’s?

How does the buying behaviour differ between men’s and women’s across channels?

EL: Starting on the channels, I think that, especially in men’s, the e-comm business is the one that’s really

taken off the most, and that’s where the navigation on the site is so important to make the consumer be able to

be easy to shop. The navigation needs to lead you to the right fit, the right wash, the size that you want. That’s

the combination of making sure, because now what they have also been able to catch up on, Levi’s, is buy

online, pick up in-store or fulfil from the store. Fulfilling from stores is very, very important, and I’d say, of all

the retailers out there, Macy’s has done the best job of that. It’s really utilising your own store as the DC so the

consumer is able to get the product, not you have to hold it all in a DC. That product is in your stores and it’s

easy for a consumer to get, whether online they can look at it and say, “Oh yes, my neighbourhood local mall

has it, so I can just pick it up there.” That part of it has really helped.

As I said, men, when they’re looking for denim, they usually already know their fit, so they know that they’re

getting the 511 or the 501, etc. They know they want stretch, they know they want a button fly vs a zip fly. It’s

rare that they’ll go and say, “I’m going to try a new fit.” That, they’re more hesitant, and I think that’s another

reason why they have stuck to their same fit. The only thing that they’ve moved into is more of a slim or a

skinny, and that’s where they then went for the taper. Right now, they’re really focusing on a looser fit and

returning back to, instead of a 14-inch opening, a 17-inch opening, and trying to bring that loose fit more to the

youth and try and get more of appeal to buy something new. That’s where the struggle is, and then bottoms,

it’s already so saturated and men tend to buy the same fit and they’re comfortable with.

[00:27:49]

Q: You mentioned maintaining the consumer perception or brand affinity among the younger consumer. It

seems like a lot of companies such as Tapestry, Michael Kors or Coach tend to fall out of favour. Could you

discuss some of the tactics that Levi’s has implemented to maintain brand affinity among men? Are there any

parallels across collaborations relating to brands such as Supreme or these other streetwear brands?

EL: That falls right into they are staying relevant in fashion. As I said, some of it, you might go, “It doesn’t

seem like it’s a fashion style out there.” They also do that relevant part of being fashionable is how they’re also

marketing everything, and part of that marketing is collaborations, collaborating with cool, hip, not so

mainstream. Yet, on the flip side, they’ve gotten a lot of marketing around a lot of big mainstream. Coachella,

I’ll never forget when they were sponsoring at Coachella in the desert, they got Beyoncé to wear the denim

shorts. That was all over the internet and we could not keep in stock women’s raw-edge shorts. It’s that type of

relevance. There was a time when Justin Bieber’s wife got one of the trucker jackets, and they also have a

studio in LA that is the Haus of Levi’s, they call it, and celebrities go there, they can get fitted. For example, she

got a custom trucker jacket that had a faux fur collar on it, it was one of our fashion items, but she customised

it because she had it stitched with patches on the back called Bieber and then she posted it, “I’m going to

become Mrs Bieber.” Again, that fur collar trucker jacket was going from 6% sell-through a week to we were

now getting 30-40% sell-throughs a week on it and we basically sold out.

The way they appeal to and really drive their marketing aspect of it, they do an excellent job. Having that

location in LA where musicians come, and the lounge in the Haus of, they also developed one in Miami too,

but the LA one was the big draw where they’d even have musicians come over and get fitted in their jeans for

their concerts coming up. It’s things like that that they did on the side that were ingenious marketing. Their

Live in Levi’s obviously has won awards. They are very good about inclusivity. They’ve also done a really good

job, and I’ll touch on this more in women’s, where they’ve gone after the plus size. They’re making everybody

feel very included in the brand, and, at the same time, the brand carries a lot of heritage and then the cool

factor. It’s that combination of bringing in fashion, marketing it correctly and getting a young consumer, while

still maintaining that appeal to your core customer.

Private and confidential 7

[00:32:02]

Q: What are the historical demand trends for women? Is it largely spurts of demand or growth where, like you

said, they may see Beyoncé with a certain style and then it sells out such as at Coachella?

EL: They’re having more fit styles that are becoming classic. At the same time, let me back up a little bit, so

women’s, there was a relaunch maybe five years ago. During the relaunch, they refocused, and, again, this was

just in women’s, their fit, they introduced the 300 Series and the 700 Series. They wanted to say, “Now it’s

about the slim and skinny,” and reintroduce new fits, and it really worked for them. At the same time, they got

new retail space in the department stores for the relaunch, and that helped. What ended up really working for

women’s, again, they came from a very, very small market share. They’re not even in the top 10. Where men’s

is the number one, has number one market share in men’s denim, women’s did not, but they quickly were able

to grow because marketing, at the same time, spent a lot of energy on women’s bottoms. That really helped

take the business to the next level. They also timed it with being able to get the wholesale partners to have

those shops, the shop-in-shops, to be able to have destinations where the consumer could see the marketing

come to life in-store. That was timed very well. At the same time, the fit was good, the product was good, so

you had the product working as well as the marketing around it that worked together and then your visual

enhancements in the store. You had all three things going. Since then, women’s bottoms has really continued

to grow because of the fits and also introducing the plus size, so they’ve done a very good job. Where their

competition, American Eagle, has the lion’s share of the women’s bottoms business, does do a big business in

plus sizes, and they realised that and more recently then they went after that. They also did it in their

marketing, and that has also worked.

Their women’s bottoms business took off because they dedicated and relaunched it correctly, and YoY they’re

bringing in new fits they’re saying. For example, the wedgie, now it’s several years old, that fit. However,

they’re continuing, make it crop, add embellishments on it, continue the core with it, but then also do a flare

with it. They’re interpreting it and making that fit still have different fashion variations to keep it continued

and relevant. Then there’s the ribcage jean, then they have the mile high jean, and then there’s the mom jean,

so you have these elements that are still fashion, but yet, within fashion, there’s a lot of core. You have a lot of

repeat customers but then you’re also appealing to the women’s fashion customer, so they’ve been able to

increase their women’s bottoms business YoY.

[00:36:04]

Q: Who’s more price-sensitive between men’s and women’s?

EL: Men, but, again, for fashion, I think, in women’s bottoms there’s the appetite to pay full price, and that’s

what’s also helped the women’s business. Men’s became very promotional, they’re just taking that promotional

cadence up. They’re lessening it. Men’s, it was much more dependent on it, whereas women’s was not, so the

platform now is that men’s is becoming less promotional. It still is, but in that tier 3 it definitely has lessened.

In women’s, it’s been not as necessary. However, when fashion doesn’t work, then you’ve got to mark it down

and move on much quicker. There’s the balance between the two.

[00:37:12]

Q: It seems like women are much more up to date in cycle and the overall nature of how many of these brands

and retailers work with their pricing vs men. Is that the case?

EL: Again, I think it can be. A fashion item for women’s can sell at reg quicker because it’s a fashion item. A

lot of those styles now, there’s more reliance on fashion. In men’s, there’s more of a reliance on the core.

There’s more core replenishment on men’s bottoms than on women’s. Women’s relies more on the fashion

Private and confidential 8

piece. There still is a big core business, but men’s is more than double the core business than women’s. There’s

less volatility in the men’s for that reason, but if you get the fashion right in women’s, then you are still able to

get higher retails and quicker churns, but the fashion has to be right. If it’s a Western theme on the fashion

and Western isn’t in and didn’t work that season, you’ve got to get out of it much quicker. Those are the things

that it’s a little riskier in women’s for the fashion bottoms, and maybe more so on your margin than anything

else.

[00:39:04]

Q: What is Levi’s overall competitiveness in the women’s category? You discussed some of the marketing

tactics used and the reintroducing of styles, but how does that stack up against the industry? There are so

many new entrants and small D2C brands innovating across every category. How much competition in denim

is there for D2C new entrants?

EL: For women’s, it’s much bigger. There are so many more labels and brands, and that’s the part that

becomes much more a challenge for women’s, but where the growth has happened is it’s about market share.

Their market share was, as I said, non-existent, and they were able to capture some of that market and

maintain it. I think there’s definitely that element for women’s fashion that is saying, “Okay, yes, Levi’s is cool

and I can customise. I do like the wedgie fit, that fits me the best, and I want to go back and find some fashion

pieces.” That’s what’s really worked. The tops business is helping that as well, so women’s tops has grown just

as fast as the bottoms, and that’s been the umbrella of the cool factor of the logo, and the youth is buying the

logo and customising the logo. There are print-screen machines that they can go in and customise the colour of

the logo that they want and customise their own graphic tee. It’s things like that that have kept it relevant and

the youth, again, is finding that cool hip factor. With that, women’s with logo has done very well. Their fleece

has done well. They created the WFH fleece programme, which is work-from-home programme, that is

oversized and comfy, and they’re appealing to that consumer that she might really want the Lululemon, now

she could buy this Levi’s fleece top that’s cool and hip and oversized and cosy. That’s what they’re going after,

so their tops business has continued to grow.

Where they’ve struggled is blouses. That’s a category in women’s that, over and over, they’ve tried to read and

react to blouses and get bell sleeves on it, etc, but that’s been a struggle because, again, that consumer is not

looking to Levi’s for a blouse. That’s the part that they struggle with. The active, athleisure, comfort, logo, that

has worked, and that piece of it, of the fleece, and spring and summer it was all about cropped fleece and

different silhouettes like that worked, whereas blouses, doesn’t matter if you put a little floral on it for the

summer, that’s not what the consumer is really looking for. They’ve styled it, they’ve tried it, it’s still a very,

very small part of their business. Then you have the denim shirts, then you’ve got the trucker jackets, and the

trucker jackets for women’s, equally as the men’s, has done exceptionally well. There has been a continued

focus on, again, cropped, more flare, more baggier truckers, your boyfriend trucker jacket, to be able to come

up with those fits and newness and fashion to be able to keep the tops business growing.

[00:43:05]

Q: Levi’s e-commerce seems like it’s still pretty small compared to other parts of the business, whether it’s

wholesaling or retail, company-owned and operated. Why is it still so small? Is there an e-commerce

component in the wholesaling front?

EL: I think that you nailed it with the wholesale business does so much business with their wholesale accounts

that run e-comm, so yes, if you pool all the wholesale, then the e-comm business is huge, but individually for

Levi’s, the bulk of their e-comm business is coming from wholesale accounts that have e-comm businesses.

Their Amazon business is huge, their Macy’s e-comm business is huge, Kohl’s, JCPenney e-comm, all of that,

and then they also are very good at recapping how those businesses are doing. Their own e-comm business,

their direct e-comm business, is still small but growing YoY. It’s still a significant percentage within their retail

stores, their business. However, most of that business is with Amazon, it’s to wholesale accounts like Amazon

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and Macy’s. The e-comm business also had to get cleaned up a little bit because the e-comm business, for

Levi’s, has really been an engine to get rid of overstocks, and was treated more like outlet than full price. It’s

done a better job of becoming less of an outlet than more of a, “This is your platform to both story-tell as well

as sell reg price, sell at your tier 3 instead of your clearance.”

That part of it, it’s also really hard for an e-comm business to have all three tiers and to justify each tier, to be

able to have a jean at USD 59.99 next to their USD 295 Vintage Collection jean. It’s really hard to sell it that

way because the consumer, once they’re in the store, it’s different, they have the environment of saying, “This

is Vintage Collection,” and you have a salesperson to sell it, etc. That part of it for the tiers is really hard online,

but at least they do have a presence so the consumer can get it that knows already that higher price point tier.

The e-comm business for wholesale accounts has been exceptionally strong, and so that piece of it, again, both

in tops but mostly in bottoms, has really been the anchor of the e-comm business, is the wholesale accounts.

NH: Why do you think Levi hasn’t made more of an attempt to segment more of that business to its own e-

commerce business?

EL: No, they’ve tried, it’s not like they haven’t. Again, how do I put it? The bulk of their business for DTC is

outlet, and it’s been on a path to try and now strategies to really build a bigger platform for retail stores, full-

price stores. By doing that, then, again, going back to that omni, you have distribution centres everywhere, you

have the right size. The size is also extremely important, to fulfil, to be able to have for the consumer, so to

have that inventory, you probably have it in your stores. When you have all those stores in fulfilment, you have

all the sizes at a given time, so that’s where omni retailers have done a really good job. The fleet of full-price

stores is still relatively small for Levi’s, but that’s where they want and they’re focusing, because they really

depend a lot on wholesale.

Luckily, currently the wholesale business is very strong because there is a big demand for those basic products

and, obviously inclusive of Levi’s, that is really generating with the consumer and the wholesale accounts are

reordering, and their inventory is, again, in a better situation than others to be able to fulfil those orders. By

doing that, the wholesale business has been good and strong, but they also rely on wholesale quite heavily, so

if wholesale starts to take a dip, their retail stores cannot take the brunt of it. Luckily, outlet does do a very

sizeable business for them, but, for example, Europe has a much healthier, stronger full-price business than

the US, so the US has much more of a reliance on DTC on the outlet business. Again, that’s different, and the

margins are healthier in Europe because they don’t rely on outlet as much. Within Levi’s, their global business,

you can tell that it’s a healthier business in Europe because that model is different. They’ve invested more in

full-price stores, their shop-in-shops with department stores at the tier 2, they’re less promotional, and so that

has helped that market. Then Asia also has really, in that market, also done very similar to Europe, really

focused much more on that than outlets, where the US has focused much more on tier 3 and outlets.

[00:50:03]

Q: Is Levi’s able to push higher tiers through some of the digital channels vs traditional retail?

EL: That’s where it’s still tier 3 here in the US. Whether it’s online, whether it’s wholesale, whether it’s

wholesale online, it’s tier 3 that’s really been pushed.

[00:50:37]

Q: What are your thoughts on Levi’s success in Asia or lack of explosive success in other brands, where it has

essentially been relying on Asia sales?

EL: It’s been a harder market for them, for sure, and I think a little bit has to do with the Asian market really

wanting luxury more than something that’s affordable. They’d prefer to spend something on a designer brand.

It’s more of a generalisation, but that definitely has been the harder appeal for the growth in Asia. Asia still has

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had a growth but not like Europe. Europe, for Levi’s, has done exceptionally well, again, really focused on tier

2, and then tops has been an area that you walk around Europe and the kids are all wearing Levi’s logo T-

shirts. They definitely got the cool, hip factor.

[00:51:50]

Q: What should we monitor this holiday season and Black Friday as it relates to Levi’s ability to meet supply

or demand vs other competitors? You mentioned some of the laser factories in Mexico. How does that stack up

against Wrangler or Lee which are pretty global?

EL: I think that Levi’s is in a very good position. Again, they’ve gone after gift-giving categories. Denim always

does exceptionally well between December and January, and even post-Christmas you see the spike in denim

sales. It’s like a return back to, “I got all these gifts but I need my jeans again.” Any retailer, I worked so many

years at Macy’s, we just saw right after Christmas the denim business just continues. That January business

for denim is exceptionally strong. The inventory flow and having the basics and having the core is key to that,

and the inventory levels are much better in the stores. When I’ve gone to some of the stores here locally, you

can see that some of the big brands like Levi’s are in much better position in the stores with their stock levels.

Again, there isn’t a glutton of inventory, which is good. You don’t want that, so there doesn’t need to be as

deep of a promotional activity. I think a lot of retailers are not going to have the unit volume but they’re going

to have the dollar volume. Again, they don’t need to be as promotional. Yes, they still will, but not as they had

in the past, because everyone wanted to outdo themselves with, “I got the cheapest price point,” and starting to

get very close to a cost price. That is no longer going to be the case, and the fact that it’s not about units sell-

through, it’s really about margin, you’re not going to need as much to get through it but the dollars will

probably still be much smaller than 2-3 years ago.

[00:54:18]

NH: I think that’s a good place to end the Interview. Let me just close by saying thank you, Edward, for your

time today, we were able to cover an extensive amount, and thank you, clients, for joining Third Bridge

Forum’s Interview. Have a good one.

EL: Okay. Thanks, everyone. Bye-bye.

Transcription ends at 00:54:32 of the recorded material

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