May 6, 2021

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Levi’s CFO Plans to Improve Capital Spending on Digital Initiatives

Levi Strauss & Co.’s finance chief is ramping up the denims maker’s capital spending, aiming...

Levi Strauss

& Co.’s finance chief is ramping up the denims maker’s capital spending, aiming to spend two-thirds of it on digital initiatives to help the corporate’s restoration from the results of the coronavirus pandemic.

San Francisco-based Levi’s this 12 months plans to allocate about $210 million towards capital expenditures, up from final 12 months’s finances, which was trimmed to round $130 million, in line with Chief Monetary Officer

Harmit Singh.

“We’re reallocating our prices in a means that we drive synergies and financial savings, and spend money on areas of development,” Mr. Singh mentioned.

Levi’s on Thursday reported internet income of $1.31 billion for the quarter ended Feb. 28, down 13% in contrast with the prior-year quarter, earlier than the pandemic hit Europe and the U.S. Digital income made up 26%, or about $340 million of internet income within the quarter, up from about 16% throughout the prior-year interval.

The corporate expects gross sales to develop as rising provides of Covid-19 vaccines and contemporary stimulus funds enhance the financial restoration. Levi’s forecasts internet income will improve by 24% to 25% throughout the first half of the 12 months, in contrast with the primary half of fiscal 2020 when it booked $2 billion in internet income. The steering is “largely pushed by a sooner restoration and a extra optimistic view that we have now,” Mr. Singh mentioned.

Levi’s, which quickly closed lots of its shops due to native lockdown restrictions in 2020, has been shifting towards e-commerce gross sales and expanded its on-line presence, by providing digital styling and buying providers, for instance. A few of the about 1,540 areas the corporate owns and operates—consisting of shops in addition to shop-in-shops—are at the moment shut amid the resurgence of coronavirus infections, notably in Europe. Nonetheless, it plans to open 81 new shops in 2021.

Harmit Singh, CFO of Levi Strauss & Co.


Jeenah Moon/Bloomberg Information

The corporate is seeking to develop its digital choices and improve its use of knowledge analytics and synthetic intelligence to forecast client demand and set the proper costs, Mr. Singh mentioned. “As we resolve about pricing and promotions, it tells us how deep you’ll be able to go,” Mr. Singh mentioned concerning the firm’s AI software.

The digital initiatives embrace spending for Levi’s smartphone app, buyer loyalty applications and increasing its “purchase on-line, choose up in retailer” providing in Europe and Asia, he mentioned.

Levi’s additionally desires to construct out its distribution for e-commerce orders, which is essentially run by third-party suppliers. “What this offers you is perception into stock,” Mr. Singh mentioned, including that higher perception into Levi’s inventory helps drive efficiencies.

Levi’s final 12 months diminished its prices, partially by slicing about 700 jobs within the U.S. It reported promoting, basic and administrative bills of $583 million for the quarter ended Feb. 28, down 12% in contrast with the identical interval final 12 months.

The corporate continues to “play offense” from an funding standpoint whereas decreasing SG&A expense in different areas, analysts at funding agency Guggenheim Securities LLC mentioned in a be aware to shoppers.

Levi’s will use some funds for the launch of its new enterprise-resource-management system, which ties collectively info on finance, stock administration, provide chains and human-resource administration. “We began in Mexico and are actually rolling it out to Canada and the U.S.,” Mr. Singh mentioned.

The latest pattern towards extra informal clothes—which Levi’s promoted throughout the pandemic months—gained’t reverse with extra folks returning to their places of work, Mr. Singh mentioned.

“We expect underlying model energy, new distribution alternatives and an accelerated shift to extra comfy attire will enable [Levi’s] to exit the pandemic higher positioned than friends,” Lorraine Hutchinson, a analysis analyst at Financial institution of America Corp., mentioned in a be aware to shoppers.

Write to Nina Trentmann at [email protected]

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