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Levi Strauss CEO Chip Bergh: Coronavirus pandemic will separate retail’s winners and losers

Levi Strauss & Co. CEO Chip Bergh speaks on the CNBC Evolve convention November 19th in Los Angeles.

Jesse Grant | CNBC

Levi Strauss CEO Chip Bergh stated the coronavirus pandemic “will further separate the winners and losers” within the retail business in the present day.

“The brands that are going to win are going to be the ones that have deep connections,” with customers, Bergh informed CNBC in an interview on Tuesday afternoon. “We are going to double down on the things that are working.”

Levi Strauss, which has been round for 167 years, goes to make use of COVID-19 “as an opportunity to come out stronger on the other side,” Bergh added. “We’ve been through it all … the Spanish flu. No other apparel company can say that.”

The firm on Tuesday reported its first-quarter 2020 results, for the interval ended Feb. 23. Levi Strauss stated it noticed a lift from Black Friday week. However, the coronavirus outbreak that began in China roughly through the center of the quarter hit the interval’s web income in Asia by about $20 million.

The firm posted web revenue of $153 million or 37 cents per share, in contrast with $147 million or 37 cents a share a yr earlier. Adjusted earnings had been 40 cents per share. Revenue rose to $1.51 billion from $1.44 billion.

Levi Strauss stated all however six shops in mainland China have reopened after a lockdown to cease the unfold of the coronavirus, together with its greatest China location in Wuhan, the place the virus emerged. Traffic there may be nonetheless beneath year-ago ranges, however is progressing week by week, in response to Bergh. E-commerce stays sturdy, he stated.

The firm stated that as a result of its bricks-and-mortar shops throughout Europe and North America, along with different elements of the world, stay closed, Levi Strauss expects to take a “materially significant” hit through the second quarter of 2020.

Additionally, retail shops in North America will seemingly stay shuttered for longer than they had been in China, Bergh stated. “China was able … to manage the crisis a little bit differently,” he stated.

Lululemon CEO Calvin McDonald said something similar about its reopening timeline when the athletic attire model reported earnings final month.

“We are really trying to learn from the reopening of stores in China,” Levi Strauss’ Bergh stated. “What are [shoppers] concerned about when they come back to stores? What are they looking for?”

One instance Levi Strauss is already seeing is that, as customers in China head again to shops, extra girls are in search of modern gadgets, like wide-leg denims, versus staples. “Women are sick of what they were wearing,” Bergh stated.

The denim maker, meantime, has both halted or canceled all of its excellent buy orders for brand spanking new merchandise from distributors — in circumstances the place gadgets weren’t utterly completed. “We are trying to manage through this with [our partners],” Bergh stated.

The CEO additionally cautioned that the retail surroundings is turning into more and more reliant on utilizing deep reductions throughout this pandemic to make gross sales. And that may weigh closely on income.

“I do think it is going to get very, very promotional,” he stated. “We have resisted that temptation.”

Levi Strauss just isn’t providing a full-year outlook at the moment. 

Shares of Levi Strauss had been up 2.6% in after-hours buying and selling Tuesday. The inventory is down greater than 35% this yr. The firm’s market cap is about $4.eight billion.

Read Levi’s full earnings press release here.

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