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Ascena Retail Group, Inc.2 0 1 8 A N N U A L R E P O R T
Dear Shareholders,
Looking back at fiscal 2018, I feel tremendous pride about what we
accomplished as a company. It was an outstanding 12 months in which
we continued to build momentum against our profitable growth drivers
and positioned ourselves to truly shape our future.
As a result, I’m more optimistic than ever.
Our business is stronger than it’s been in decades, and we are at
the vanguard of purpose-driven leadership. We’ve been successful
because of the combination of our brands, our people, our values
and our ability to execute. These competitive advantages will serve
as our bedrock as we create responsible, sustainable growth in the
years ahead.
This spring, we returned to the public market, and I’m delighted to
welcome our new shareholders to the LS&Co. family. We intentionally
postponed the release of this report and our annual shareholder
meeting (both of which typically occur in April) due to the timing
of our IPO.
Fiscal 2018 Results*
In fiscal 2018, we delivered revenues of $5.6 billion, up 14 percent on a
reported basis (13 percent in constant currency). This was our highest
rate of growth in more than 25 years, and it came on the back of 8
percent reported growth in fiscal 2017. Our growth was broad-based
with notable gains across channels, regions and categories.
We grew beyond even our own expectations and outpaced our peers,
and we did so profitably, with Adjusted EBIT up 13 percent for the year
in reported dollars.
Our disciplined approach to capital allocation contributed to our
strong performance as we deployed capital of $159 million, primarily
behind initiatives to grow the business, including direct-to-consumer
investments in eCommerce and omnichannel technology capabilities,
as well as the opening of 115 company-operated stores on a gross
basis. We also paid $90 million in dividends — a 29 percent increase
from the prior year.
Chip Bergh
President and Chief Executive
Officer of Levi Strauss & Co.
* All figures are revenues presented in constant currency unless stated otherwise. For more information
regarding constant-currency revenues, Adjusted EBIT and the other non-GAAP financial measures
discussed in this annual report, see the discussion and reconciliations provided at the end of this
annual report.
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
1
Diversification Continues to Pay Off
Our business is more diversified than ever as we expand the reach
of our brands across markets, channels and product categories.
Since fiscal 2015, our international business, led by Europe, has grown
double digits and now comprises 54 percent of our total revenue. Our
direct-to-consumer business (both brick and mortar and eCommerce)
has also grown double digits for three years in a row and is now
a $2 billion business.
We are broadening our product categories beyond men’s bottoms
as women’s, which has grown consecutively since fiscal 2015, is now
nearly one-third of our total revenue. And our tops business, which
continues to grow double digits, has more than doubled over the last
three fiscal years. We will continue to drive diversification through
high-growth, high-margin businesses while protecting and growing
our profitable core.
In short, our strategic choices continue to pay off, and our values-driven
leadership continues to differentiate us in a crowded marketplace.
Our Strategic Choices
Our first strategic choice is to grow our profitable core business,
which includes Levi’s® men’s bottoms globally, the Dockers® brand in
the United States, key wholesale accounts and our five largest mature
markets: the United States, France, Germany, Mexico and the United
Kingdom. Total men’s bottoms — our biggest business — grew 3 percent
for the year. Our U.S. wholesale business grew 7 percent for the year
despite the significant market challenges this channel continues to
face, and our top 10 wholesale customers grew 10 percent for the year.
From a regional perspective, Europe led the pack, with revenue growth
of 21 percent for the year. U.S. revenues were up 8 percent for the year,
and our next four largest markets grew 10 percent collectively. When
this group of profitable core businesses grows, it generates cash that
we can invest in our other strategic choices.
Our second strategic choice is to diversify the business by
“expanding for more” into categories where we are underpenetrated
and have outsized growth opportunities. Our total women’s business
grew 28 percent in fiscal 2018, exceeding $1.6 billion in revenue. We
have grown our women’s bottoms business every quarter since it was
relaunched in mid-fiscal 2015, with the last eight quarters growing
double digits. We’re proud of the progress we’re making to grow our
share of women’s closets around the world and are well-positioned
to drive even more growth in the years ahead.
2
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
Our total tops business grew 37 percent and surpassed the $1 billion
mark, driven by a wide variety of tops for men and women — from
graphic tees and fleece to trucker jackets. We have a long runway
for more growth ahead of us as we expand the global reach of
our brands.
Overall, Asia was up 8 percent, with nearly every market up double
digits. China was flat for the fiscal year as we closed unprofitable
franchise doors and began restructuring the business for growth. We’re
focused on growing our business in China and shaping a successful
future in this important market.
And our value brands, Signature by Levi Strauss & Co.™ and Denizen®,
continued to gain ground with this important consumer segment in the
United States and internationally.
Our third strategy is to become a world-class omnichannel retailer.
Our direct-to-consumer business grew 16 percent in fiscal 2018, with
the fourth quarter of fiscal 2018 marking 11 consecutive quarters of
double-digit growth for this business. We opened new flagship stores
in Mexico City, Toronto and New York’s Times Square, each showcasing
new and innovative retail concepts to engage and delight consumers
— from Tailor Shops offering endless customization opportunities to
360-degree virtual tours for online consumers. We also rolled out
RFID technology to our global fleet of Levi’s stores, putting us one
step closer to ensuring we are always in stock with the products our
consumers want.
Our eCommerce business, which grew 16 percent in fiscal 2018,
continued to drive excitement and engagement with consumers
around the world and is an important contributor to our direct-to-
consumer success.
Our fourth strategic choice is to achieve operational excellence.
In February 2018, we launched Project F.L.X., a laser-based innovation
that is fundamentally transforming the way our products are designed,
made and sold. Project F.L.X. dramatically shortens the time it takes
to finish jeans and reduces the number of chemicals required in
the process.
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
3
Profits Through Principles
There’s more about Project F.L.X. and other highlights from fiscal 2018
in the pages that follow, but I want to stress that we achieved all
that we did last year without compromising our commitment to doing
right by people and the planet. We had our sights set on the future as
we embraced ambitious new targets for combating climate change,
took bold stands on important social issues such as immigration and
gun violence prevention and contributed approximately $11 million to
community partners around the globe.
As we made the transition to public ownership, I reinforced over and
over to investors and other stakeholders that we will continue to be
as active and outspoken as we’ve been throughout our history. Our
values-driven leadership is central to who we are as a company,
our relationship with our consumers and our incredibly powerful
brands – and it’s an important part of how we’ll operate in the future.
And while this type of leadership may be more popular than ever, for
us, it’s how we’ve always done things.
Although I can’t say definitively that leading with purpose has driven
our business growth, I can say that our business is as strong as ever.
We recorded our highest revenue growth in more than two decades
in fiscal 2018, a year in which we took on some of the most pressing
and complex issues of our time.
It’s been inspiring to see how our leadership on issues that we care
about can complement our business success. Going forward, we
expect our business momentum to continue. We know there will
be headwinds to navigate ahead, including ongoing challenges in
U.S. wholesale, geopolitical risks and the absence of a 2019 Black
Friday sales bump given the structure of our fiscal calendar. But
we’re confident that we have the strategies and people in place to
overcome these and additional challenges, and to continue to thrive
as a company.
As before, we will be guided by our four strategic choices, our purpose
and our aspiration to be the world’s best apparel company and one
of the best-performing companies in any industry. That’s what got us
here, and that’s what will take us forward as we make our audacious
vision for the future a reality.
Sincerely,
4
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
LS&Co.
Fiscal Year 2018*
+12.7%
53.8%
49.4%
50.5%
51.2%
52.3%
+7.0%
+2.6%
+1.2%
+3.1%
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
NET REVENUE (Constant currency)
GROSS MARGIN (Reported)
$504M
$479M
$480M
$481M
+13.0%
$542M
$284M
$158M
$95M
$118M
$74M
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
ADJUSTED EBIT (Reported)
FREE CASH FLOW (Reported)
* For more information regarding constant-currency revenues, Adjusted EBIT, free cash flow and the other non-GAAP
financial measures discussed in this annual report, see the discussion and reconciliations provided at the end of this
annual report.
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
5
Snapshot of Our
Business Today
74%
20%
4%
ECOMMERCE
(Company-Operated)
TOPS
BOTTOMS
6%
FOOTWEAR &
ACCESSORIES
FY18 NET REVENUE
$5.6B
ASIA, MIDDLE EAST
& AFRICA
16%
29%
55%
EUROPE
AMERICAS
31%
RETAIL
(Company-Operated)
65%
WHOLESALE
(Including 7% Franchise)
29% WOMEN’s**
69% MEN’s**
86%
7% 7%
15,100
EMPLOYEES
50,000
RETAIL
LOCATIONS
5,000+
TRADEMARK
REGISTRATIONS
& PENDING
APPLICATIONS
110+
COUNTRIES
~3,000
BRAND-DEDICATED STORES
& SHOP-IN-SHOPS
6
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
** 2 percent of net revenues in fiscal 2018 were from non-gendered products.
Our Business Strategies
By the Numbers*
Grow the core
Our performance in these areas is what anchors
the company and gives us the flexibility to invest
in our other strategic choices.
MEN’S BOTTOMS
+3%
+8%
U.S. MARKET
TOP 10 WHOLESALE CUSTOMERS
+10%
+10%
FOUR OTHER TOP LS&CO. MARKETS
(COLLECTIVELY)
Expand for more
We know that a diverse and well-balanced portfolio
is critical to future-proofing the company against
market headwinds.
WOMEN'S BUSINESS
+28%
~1/3
WOMEN’S NOW REPRESENTS
ALMOST ONE-THIRD OF
OUR BUSINESS
+37%
TOPS
$1B
TOPS HIT THE
$1 BILLION MARK
Become a leading omnichannel retailer
We want to be where our consumers are and
believe our owned channels represent the very
best experience of the brand.
+16% DIRECT-TO-CONSUMER
+16% ECOMMERCE
Achieve operational excellence
We continue to look for ways to to improve
productivity and drive a high-margin business.
+150
bps
GROSS MARGIN vs PY
(Reported)
* All figures and growth rates are revenues versus prior year presented in constant
currency unless stated otherwise. For more information regarding constant-
currency revenues and the other non-GAAP financial measures discussed in this
annual report, see the discussion and reconciliations provided at the end of this
annual report.
Brands
Lead
the Way
Our diverse portfolio of iconic
brands sets us apart, and in fiscal
2018 they put us squarely in the
center of the cultural conversation.
We made strong marketing plays,
both in traditional advertising
and through out-of-the-box
partnerships with collaborators
and influencers, which brought
us plenty of positive attention.
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
The Levi’s® brand stayed firmly
in the spotlight in fiscal 2018, with a
thought-provoking ad highlighting
the importance of voting paired with
a successful social campaign featuring
celebrities in our VOTE T-shirt.
The brand reinforced its longstanding
connection to the music scene while
establishing Levi’s as the go-to uniform
for festivals like Coachella.
Our collaborations are a testament to the
breadth of the the brand’s appeal – from our
popular partnership with Air Jordan to putting
jeans on Mickey Mouse for the first time (not
to mention special collaborations with leading
brands like Supreme and cultural icons from Lily
Aldridge to Justin Timberlake).
The brand continued to innovate to meet
consumers’ needs, adding new fits and styles
like women’s high rise and men’s taper, and
partnering with tech leaders like SNAP Inc.
and Pinterest to develop new and compelling
ways for consumers to connect with our
brands and buy our products. We continue
to find new ways to break down the walls
between brick-and-mortar and online and
bring more customization features to our Levi’s
eCommerce sites.
All of that contributed to the brand’s 13 percent
revenue growth in fiscal 2018, with especially
impressive results for women’s and tops, each of
which grew double digits, while the Levi’s men’s
business grew 8 percent for the year.
9
The Dockers® brand is making progress
and showed pockets of growth this
year, especially in Europe, where fiscal
2018 revenues were up 16 percent.
The Dockers team has been making strides
in its mission to reinvigorate the brand, with
eye-catching marketing like the “Always On”
speaker series designed to connect with
young entrepreneurs around the globe, and
the partnership with influencer Zach King.
Paired with investments in new products like
Signature Khaki 2.0 and Smart 360 Flex and
updated branding featuring the original Dockers
logo, we are focused on bringing this brand
back to growth.
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
The Signature by Levi Strauss & Co.™
and Denizen® brands were developed
for value-conscious consumers and
offer quality craftsmanship and great
fit and style at affordable prices.
This was a big year for our
value brands, as combined revenues
grew 29 percent in fiscal 2018.
The growing popularity of Signature by
Levi Strauss & Co. was a key driver behind
the growth we saw in our U.S. wholesale
business. The brand expanded its reach in the
United States and Canada and also launched
in Mexico and Brazil.
The Denizen brand expanded its presence
in the United States this year and launched
in Mexico and India.
11
Innovating for
the Future
The ingenuity of our teams around the world was a key part of the successes
that helped insulate us against market headwinds. And in fiscal 2018,
we delivered a major breakthrough in jeans finishing — a process unchanged
for more than half a century — with the launch of Project F.L.X.
PROJECT
F.L.X.
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PLPLPLPLP ATATATA FOOFOFOORMRMRMRM TTTTHAHAHAHAHH T T TTTT TRTRTRTRTT ANANANANSFSFSFS ORORORO MSMSMSM HHHHOWOWOWW
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and resprespresponsionsionsisible ble blebl supp
and
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THE OLD
PROCESS
THE F.L.X.
PROCESS
DIGITAL FINISH DESIGN
2 weeks or less to create a finish
design using digital imaging tools
LASER
TECHNOLOGY
Finishes
applied using
automated
laser
treatment
A CLEANER JEAN
Just a
few dozen
chemicals
required
MAKE WHAT
YOU SELL
Less inventory and
reduced waste
PHYSICAL
PROTOTYPING
Physical
prototypes
can take
up to 8 weeks
MANUAL
PROCESS
Labor-intensive
process to
finish 2-3
pairs of jeans
per hour
MANY CHEMICALS
More than a
thousand
chemical
formulations
used to
create finishes
SELL WHAT
YOU MAKE
Long lead times
of often more
than six months
Project F.L.X. is a disruptive tech-
nology that allows us to create
and sell-in new products without
needing to produce a single
sample. It brings the finishing
process closer to the consumer,
which can shorten lead times and
lessen the amount of inventory
we need to carry. It also uses far
fewer chemicals than traditional
finishing methods.
As dramatic as it is, it was far from
our only demonstration of the
inventiveness of our people and
the adaptability of our products. To
take just one example: The Levi’s
Commuter X Jacquard by Google
jacket, representing one of our first
forays into connected apparel,
received its first update. But unlike
a lot of tech these days, it didn’t
require consumers to buy any-
thing new, demonstrating that even
cutting-edge fashion technology
can still be built to last.
With these advancements and
more, including several that we
plan to roll out in fiscal 2019,
we know that our future success
will be fueled by the vision and
innovation we are building into
everything we do.
12
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
Future Shapers
In fiscal 2018, we made some im-
portant changes to our leadership
and organizational structure that
will help us carry out the plans we
have for the coming years.
We consolidated our product and
supply chain teams to create a
new organization known as Global
Product, led by Liz O’Neill. This move
brought together the key product
functions of design, merchandising,
product development, innovation,
sustainability and planning into
a single team that’s responsible
for the end-to-end view of the
product lifecycle, from ideation to
logistics to what ultimately shows
up in stores and online. This further
integrates our supply chain into the
consumer journey and enhances
our ability to fully
leverage
emerging innovations like Project
F.L.X. technology.
We also established a new Direct-
to-Consumer organization led by
Marc Rosen, who previously led
our eCommerce business. This
organization is charged with meeting
and exceeding the expectations of
today’s consumer by delivering a
seamless experience across brick-
and-mortar and eCommerce,
and deepening our relationship
with the people who purchase
our products.
And we established a new Strat-
egy and Analytics organization,
positioning ourselves to realize the
potential of a previously untapped
competitive advantage: our data.
Katia Walsh, who had served as
chief data and analytics officer at
Vodafone, took the helm of this
organization in early fiscal 2019 as
our Chief Strategy and Artificial
Intelligence Officer.
LEVI STRAUSS & CO. 2018 ANNUAL REPORT
13
Profits Through
Principles
The progress that we are making as a company is evident in our financials – but our
impact has been felt much more widely this year. We used our voice to champion
the values that have driven our company since its founding and to stand up for the
issues that are important to the communities where we live and work.
We continued to act on the premise
that it’s not just the products we
make but how we make them that
matters. Across product lines, we
made progress toward achieving —
and in some instances surpassing
— our sustainability goals.
Our use of more sustainable
cotton from the Better Cotton
Initiative and organic cotton
growers nearly doubled, from 34
percent of our total cotton usage
in fiscal 2017 to 67 percent in fiscal
2018. Through the Better Cotton
program, we help farmers grow
our key raw material using less
water and fewer chemicals, which
lessens the impact of the crop
and makes it more profitable for
the farmers.
On climate, we participated
in the We Are Still In business
coalition to uphold the goals of the
Paris Agreement and launched
our new, science-based Climate
Action Strategy (in part because
we met our last set of targets three
years ahead of schedule). Through
this industry-leading strategy, we
committed to reducing our carbon
footprint in our facilities by 90 per-rr
cent and across our supply chain by
40 percent by fiscal 2025. To help
CLIMATE
Science-Based Targets for 2025:
(cid:5)(cid:3)Carbon emissions down 90% in owned-and-
operated facilities
(cid:5)(cid:3)Carbon emissions down 40% across supply chain
(cid:5)(cid:3)100% renewable electricity in owned-and-operated
facilities
COTTON
67% cotton sourced from Better Cotton Initiative growers,
organic cotton farms or recycled cotton suppliers
(cid:5)(cid:3)Goal of 75% in 2019
(cid:5)Goal of (cid:3)100% by 2020
WATER
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