Levi Strauss says 2027 net revenue of $9bn-$10bn would reflect 6-8% organic annual growth, with the jean specialist also eyeing 15% adjusted EBIT margin by the same year.
At its recent Investor Day, Levi Strauss introduced an accelerated five-year growth algorithm for the period from fiscal year 2022 to fiscal year 2027. Specifically, this includes:
- 6-8% annual net revenue growth up from prior targets of 4-6%.
- Adjusted EBIT margin improvement to 15%.
- Commitment to increasing shareholder returns through a new dividend payout target and recently approved share repurchase programme of $750m.
“We are emerging from the pandemic a much stronger, more profitable company than we were at the time of our IPO in 2019, having made meaningful progress on executing our strategy and diversifying our portfolio,” said Chip Bergh, president and CEO of Levi Strauss & Co. “We are entering this next phase of growth with strong momentum, proven execution and a bold strategy to increase profitable top-line growth annually by 6-8%, growing our direct-to-consumer business to 55% of revenue, and nearly doubling the women’s business.”
By advancing its most impactful growth drivers – Brand-Led, Direct to Consumer (DTC) First and Diversify the Portfolio, the company plans to accelerate revenue growth and profitability, while increasing reinvestment and capital returns to create significant value for all its stakeholders.
Brand Led: The company will elevate and strengthen the Levi’s brands (which include Signature by Levi Strauss & Co. and Denizen), Dockers and Beyond Yoga by more effectively integrating product, design, marketing and consumer in-store experiences with a global vision executed consistently across all markets. This is expected to support targeted revenue growth for the Levi’s brands of approximately $2bn-$2.5bn and for Dockers and Beyond Yoga combined revenue to approach $1bn by 2027.
DTC First: The company will accelerate investment in stores, online platforms and other digital capabilities, while creating an integrated omnichannel shopping experience, which is expected to profitably drive this channel to 55% of annual net revenues by 2027 while tripling the e-commerce business.
Diversify the Portfolio: The company will further capitalise on the substantial opportunity to amplify each brands’ reach and grow share across geographies, categories, genders and channels. The company expects to nearly double both the women’s and tops revenue by 2027.
To support this growth, the company will continue to invest in digital, data and AI capabilities as drivers of business performance, focused on increasing consumer loyalty, facilitating speed to market timelines, and improving profitability. As part of this digital transformation, the company will also continue to upgrade its enterprise resource planning system and automate and digitize key processes, while seamlessly linking its own enterprise systems, to create a more simplified, productive work environment.
“Execution of our strategy is expected to accelerate top-line growth and adjusted EBIT margin expansion to 15% over the next five years, and we have proven we can execute in both good and tough times,” said CFO, Harmit Singh.
“We believe our strong profitable growth and return on invested capital will generate ample free cash flow to fund investments in our business and to drive higher shareholder returns with an annual target of 10-12%.”
The company also reaffirmed expectations for fiscal 2022 for net revenue growth of 11-13% compared to FY 2021 to between $6.4bn and $6.5bn and adjusted diluted EPS of $1.50-to-$1.56.
Levi Strauss hailed its first-quarter 2022 results as exceeding expectations, with reported net revenues of $1.6bn up 22% on the prior year, but GlobalData analyst Pippa Stephens says growth slowed slightly versus the prior quarter, likely due to the rise in virus cases and heightened economic uncertainty.