Global Courant
Pedestrians walk past a Levi’s store in Midtown Manhattan.
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The CEO of the world’s most famous denim jeans company said he knew from his second day on the job that the best way to turn around the company was to fire more than half of his executives.
“The easiest way to change the culture is to change the people. I had 11 direct reports, and in the first 18 months, nine were gone,” says Charles Bergh, CEO of Levi’s Strauss.
Still, Bergh told CNBC’s Christine Tan that his biggest regret was not firing the wrong people quickly enough.
“My biggest regret is that we were not able to rely on some of these great leaders, and we lost a few because I held on to someone longer than necessary.”
Bergh joined the clothing retailer in 2011 at the worst possible time: consumers were no longer buying Levi’s jeans.
“The brand was really lost. We had a whole generation of consumers who didn’t grow up wearing Levi’s like I did when I was a kid,” Bergh said.
“The company’s performance had been very erratic for more than a decade. One year they would see revenues increase, but profits would decline. The next year they would record profits, but earnings would decline.”
Charles Bergh, CEO of Levis Strauss & Co., speaks during the 2015 Fortune Global Forum in San Francisco, California, USA, on Tuesday, November 3, 2015.
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Six years later, Bergh brought what he called a once “broken” brand back into the spotlight.
In 2017, Levi’s achieved annual sales growth of 8% highest in ten years and well above the growth of 3.1% a year earlier. The company continued to build and make more and more progress Sales growth of 14% year-on-year in 2018.
Bergh will step down as CEO next year and said his greatest legacy will be to shake the company out of complacency and build a team with the brand at the center of its culture.
“I am just the conductor of the orchestra and have built a great team around me,” he added.
There are still problems
However, not everything goes smoothly. Company has severely cut its 2023 profit outlook after reporting a sharp decline in wholesale revenues and weak sales in the US, its largest market. It now expects revenue to grow between 1.5% and 2.5% this year, up from the previous range of 1.5% to 3%.
Like many apparel companies, Levi’s has had to adapt to changing consumer preferences, especially growing demand for comfortable and looser garments as employees return to their offices after the pandemic.
A guest wears a blue denim shirt from Levi’s during New York Fashion Week, on September 13, 2022 in New York City.
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In 2021, the company acquired sportswear brand Beyond Yoga, a move Bergh previously told CNBC would help grow the women’s business. At the time, he said the goal is for women’s clothing to make up 50% of Levi’s sales.
“It drives me crazy when I see a woman walk into our store, buy our pants and then walk out and go to an unnamed competitor’s store to buy their top,” Bergh said.
The sale of women’s products is fabricated 35% of net turnover in the first half of the year.
Expansion of the footprint in Asia
A promising area for Levi’s growth is its expansion into Asia.
“We are opening bigger stores (and) we have more impact on consumers,” Bergh said, emphasizing that revenge spending among Chinese customers will be a “huge opportunity” for the brand. whoa
Sales from Asia in the second quarter rose 18% to $262 million.
Pedestrians walk past a Levi’s store in Hong Kong.
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Yet Asia accounts for less than 20% of the company’s total sales and China less than 3% of the company’s total sales, Bergh said.
“Many of our competitors are 10% or more. Look at Nike, 40% of Nike’s market cap is probably China. So we know we have an opportunity here,” he said.
“We’re adding about 100 doors a year globally, and about a third of those stores will be here in Asia.”
