Levi Strauss & Co (LEVI) Citi 2025 Global Consumer & Retail Conference summary

Transformation strategy and business focus

• 2024 marked a year of transformation, with a focus on narrowing business scope and exiting low-margin segments such as Denizen, Dockers, and a small European footwear business, aiming to complete Dockers' exit in 2025.

• Emphasis on becoming a DTC-first company, targeting DTC to reach 55% of business mix, with wholesale as a complement.

• Leadership structure realigned to support transformation, including new hires and a matrix organization to drive productivity and growth in DTC and e-commerce.

• Go-to-market calendar being shortened from 16 to 12 months to increase agility and innovation speed.

• Transformation led by the CFO, with a focus on driving higher revenue per square foot and cost efficiencies.

Financial performance and margin outlook

• DTC margins have improved from low teens to high teens, with DTC now nearly half of total business and growing toward 55%.

• EBIT margins increased from 9% in 2023 to over 10% last year, with a long-term goal of 15%.

• Distribution expenses targeted to decrease from 6-7% of revenue as new automated DCs ramp up, with cost reductions expected in the second half of the year.

• Organic net revenues introduced as a new metric to better reflect underlying business growth, excluding impacts from business exits and calendar anomalies.

• Use of proceeds from potential Dockers transaction likely to be returned to shareholders via buybacks or special dividends.

Sourcing, tariffs, and supply chain

• Sourcing diversified across 25 countries, with no single country over 20%; China now less than 1% of US imports.

• Tariff exposure considered manageable for 2025, with pricing actions taken to offset increases, especially in Mexico.

• Supply chain flexibility and scenario planning in place to respond to evolving tariff landscape.

• New distribution centers in Germany and the US operated by GXO to drive automation and cost efficiency.

• Short-term distribution costs elevated due to transition, but expected to normalize by end of first half.