Levi'S Levis Transformation, Targeting 95, Women, Customization

Levi's, a 166 year old Levi's shop (Levi's), began its transformation in the New York Stock Exchange in March.

In order to break through the traditional image of street and masculinity, Levi's began to target the majority of the post-90s or even 95. In order to get rid of the limitations of a single category, Levi's will enhance the proportion of women's products and promote the trend of customization. It will be the focus of its next stage. At the same time, it will also aim at China's new first tier cities in the channel and open the largest flagship store in Wuhan.

However, affected by the macroeconomic situation and the weakness of the US retail trade, Levi's's second time list is not ideal in the second quarter of this year. It is different from Levi's's ambitious and the industry still takes a wait-and-see attitude.

Channel Transformation: a new line of key layout

In April 9th, Levi's released its first quarter financial results as of February 24, 2019, the first financial report since the company went public. The results showed that the first quarter income was $1 billion 440 million, an increase of US $100 million compared with the same period last year, with a profit of US $146 million 600 thousand, an increase of 81% over the same period last year.

The glossy transcript did not last long. In July 9th, Levi's announced its second quarter financial results for the year ended May 26, 2019, with net profit of $29 million, lower than analysts generally expected, down 63% compared with the same period last year, and the adjusted net profit still fell 17% over the same period last year. Levi's attributed the sharp decline in net profit to IPO, advertising and marketing costs, but sales fell to $1 billion 310 million in the two quarter, and gross profit margin fell 0.6 percentage points year-on-year, and sales in the US wholesale market, which accounted for nearly 1/3, fell 2%. The announcement of the second quarter results in Levi's's share price plunging by more than 12%, forcing it to accelerate the pace of transformation.

It is worth noting that during the reporting period, the revenues of the Americas, Europe and Asia were 693 million US dollars, 398 million US dollars and 222 million US dollars respectively, representing an increase of 4%, 17.8% and 12.2% respectively. Thus, the growth of the US domestic market has already become weak, and the European and Asian markets have become their new growth engines.

The global market share of China's clothing market has reached 20%. In 2018, the size of China's cowboy garment retail market was nearly 300 billion yuan. In 2018, China's market revenue accounted for only about 3% of Levi's's total revenue. Vigorously pushing the Chinese market will be the inevitable way for Levi's.

Yu Guoqing's largest flagship store in China, located in Wuhan's landmark business district, Chu Han street, is located in the most famous international clothing brand flagship store in the first tier cities in. Levi's chose a new first tier city.

"The second tier cities in China are becoming more and more mixed. Consumers in Wuhan, Chengdu, Hangzhou and Nanjing are not much more fashionable and consuming than those in the first tier cities, so we need to look at them from the perspective of development." Amy Yang, managing director of Levi's Greater China, told the first financial reporter that Levi's's channel strategy is focused on expanding, consolidating the base of the first tier cities and expanding the second tier cities. "Many brands are making efforts to sink the market, but Levi's's seven or eight of the business is still concentrated in the second tier cities, making the existing stores perfect, not pursuing the number of shops, and not pursuing premature subsidence."

In terms of channel, Levi's has long relied on the wholesale business of large business super chain enterprises. In the 2016-2018 fiscal year, wholesale channels accounted for 30%, 28% and 27% of the company's annual sales, accounting for a decline year by year. The proportion of direct revenue has increased to 35% of total revenue. Amy Yang said. Online retailers The channel currently contributes about 20% of sales, and the company regards it as a brand display platform, focusing on the consumer big data accumulated from it.

Amy Yang told the first financial industry that the stores in the first tier cities are mainly self operated. The flagship store in Wuhan adopts a pattern of deep cooperation with dealers. The mode may be duplicated in other new store layout. After re listing, the young consumers will be the core to create a high end, fashion and diversified brand image. The management level of the company has reached a high degree of consistency with the board of directors. The Chinese market has achieved double-digit growth for 13 consecutive quarters, and there is still room for growth. We will focus on the layout of key cities and plan to achieve a 1.6 fold increase in 3 years.

Exploring diversification and customization

Unlike most Levi's stores, the flagship store in Wuhan is distributed with dragon shaped relief, frescoes, women, immersion dannin light and other tidal current elements. The joint venture with QQ dancer cooperation is displayed in the most prominent position of the door. A custom area has been specially developed on the two floor. Consumers can choose different styles of rivets and embroidery stickers on their own, so that the tailor can make up their desired patterns or process them to their designated locations, so that they can have a unique exclusive Denim / trousers. The clerk told reporters that the custom-made order had been booked until mid October. On the third floor, there are a number of Levi's recovery and renovation projects unique to the Chinese market in the 60~90 century, many of which have been shown to be booked.

From this flagship store style, which is highly valued by all Levi's executives, it is easy to see that diversification, youth and customization are the main directions of Levi's's product and brand transformation.

In 2018, Levi's earned $4 billion in revenue of $5 billion 600 million, and is still a highly masculine fashion brand. In the document submitted to the SFC this year, Levi's also said it would expand its business focus from cowboy clothing to other categories such as footwear and clothing. This year's second quarter report also showed that women's clothing business grew by 16% over the same period last year, and the growth of light luxury business increased by 14%.

Reporters learned that the rapid growth of women's groups and the growth of tops and non denim business are important engines for Levi's's rapid growth in China.

In terms of customizing business, Levi's has only launched the customized processing as described above in the domestic market. The higher price (the market price of the US market is not less than 1000 US dollars), the complete customization from 0 to 1, takes longer and costs more. Amy Yang revealed that full customization is expected to introduce the Chinese market in one or two years.

"Customization is a big concept. What we need to solve is who you are and what you want. Technology is no longer a problem at the moment. Individuality is the pursuit of more and more people, especially the young people represented by the post-90s. They advocate freedom, release themselves, and match with Levi's's brand tonality, which will be the focus of the brand's future focus." Amy Yang said.

However, Levi's also needs to face other competitors in the industry, such as the fast growing Cowboy brand American Eagle Outfitters. The group has stripped its cowboy business including Wrangler, Lee and Rock&republic brand and set up a new listing company Kontoor brands; GAP is also divest its old Navy (Old Navy) brand and set up an independent listed company, and these two independent companies have a large number of jeans business.