How CEO Michelle Gass plans to turn Levi’s into a $10 billion business

Sign up to receive the Vogue Business newsletter for the latest luxury news and insights, plus exclusive membership discounts. This September, during fashion week, Levi’s will bring its Haus of Strauss retail concept to Paris. Located in the hôtel Libéral Bruant, a town house built in the 17th century in Le Marais, the 1,300-square-metre space will include a made-to-order service (€595 for a custom pair of jeans), workshop and showroom, and display collaborations such as recent tie-ups with Junya Watanabe and Sacai. It is an important moment for the brand’s parent company, Levi Strauss & Co, which is moving upmarket and undergoing a restructuring steered by new president and CEO Michelle Gass. Six months into the role, Gass’s vision is clear: “Our ambition is to grow [Levi Strauss & Co] from about a $6 billion business today [in fiscal year 2023, the company reported $6.2 billion in revenue] to $10 billion. We’ve also seen an opportunity to create more profitability with the company, so to go from roughly a 10 per cent EBIT margin to 15 per cent,” she tells Vogue Business during a visit to the new Haus of Strauss space. There are a number of challenges, including wholesale channel woes and tackling the big sustainability questions facing the wider denim industry. But Gass is confident that a focus on its direct-to-consumer (DTC) channel, growing its international presence and tapping into opportunities across womenswear and non-denim dressing will help to futureproof the company, which owns the Levi’s, Dockers, Beyond Yoga and Signature brands. (It announced earlier this year that it is phasing out its Denizen brand as part of the restructuring initiative.) Paris will be the fifth Haus of Strauss globally. The first opened in Los Angeles in 2012 as “an exclusive haven for those in the music, entertainment and design communities to experience the best expression of the Levi’s brand”, according to the company. Tokyo, Johannesburg, London and Mexico City followed — each designed differently to reflect the local market. (Johannesburg has since closed.) The Paris space is designed to give a nice play to fashion. On the wall, a quote from Yves Saint Laurent reads: “I wish I had invented blue jeans. They have expression, modesty, sex appeal, simplicity — all I hope for in my closet.” Pivoting to DTC-first Levi’s reported flat sales in 2023 and continues to navigate weakness in the wholesale channel, notably in the US as retailers reduce restocking. It announced a two-year plan to streamline its operations and accelerate its brand-led and DTC-first strategy, which is expected to generate net cost savings of $100 million. This includes a 10 to 15 per cent reduction in its global corporate workforce in the first half of 2024. Sales were up 9 per cent at constant currency rates to $1.4 billion in the second quarter of 2024. “We are now seeing the momentum come back in the business and we do see that accelerating in the second half of this year,” says Gass. The company declines to provide a timeline for its $10 billion revenue goal. “Several years ago, the company did put out these broad-based objectives, [but] there has been a lot of volatility in the marketplace,” Gass explains. The global jeans market is expected to grow 2.4 per cent to a retail value of $100.6 billion in 2024, after 2 per cent growth in 2023 and a 0.7 fall in 2022, according to Euromonitor. Levi’s has the largest market share, ahead of Kontoor brands (Wrangler, Lee, Rock & Republic), Inditex, Fast Retailing and Gap. Gass isn’t fazed by the task ahead. She joined Levi Strauss & Co in January 2023 as part of a succession plan, becoming CEO a year later. “We had a fairly unconventional but I would say quite successful CEO succession process,” she says. “Chip Bergh, the prior CEO, and I knew each other for 10 years. My prior role was CEO of a company [American department store chain Kohl’s] that was one of Levi’s top customers. So that’s how I got to know the team and Chip, and the brand. Certainly that retail experience I had prior coming in is serving me well with the pivot [to a DTC-first retailer] that we’re making here.” Gass’s résumé also includes 17 years at Starbucks, her last role there being president of EMEA. “I joined and we had about 800 locations worldwide. When I left, we had 20,000. That was a wild ride,” she says. Levi’s has 1,200 company-owned and operated stores, and 3,000 with franchise partners. DTC excluding franchises currently represents 47 per cent of sales. “I see us opening at least another 500 to 600 stores as we look forward,” Gass notes, projecting a pace of around 100 stores a year. “Our highest growth area on store builds will be Asia. That’s where we are least developed, in particular, India, Korea, the Philippines and Thailand. The China market is a bit soft — softer than our expectations — but we see the potential and we are a very small player in the denim market in China today, so we will navigate the headwinds that are upon us right now in terms of the softness of the consumer spending in our category.” Levi’s is going to do a lot more local product development in China, including lighter denim styles for warmer climates. “Consumers want a very premium experience, and they want to see more change in our offer more frequently. Based on those learnings, we are setting up a local product engine in the market. We will have more premium items, but also things like tops,” she shares. All of this product development, however, is set against some major challenges when it comes to addressing denim’s environmental impact. The industry has a reputation as one of the dirtiest categories in apparel manufacturing, due largely to its water-intensive production and ecologically harmful dyeing processes. Despite progress, many of the root problems remain. In 2021, Levi’s announced that it would focus its sustainability efforts on three core pillars: climate, consumption and community, starting with climate. In May 2024, it said its goal to reach net zero by 2050 had been validated by the Science Based Targets initiative (SBTi). “Just as we are a leader in denim, we’ve got to be a leader in sustainability,” says Gass. “Denim is a product that consumers want so what we’ve got to do is invest in innovative products and technology, to reduce our impact on the environment.” The company will release its 2023 sustainability update in September. The womenswear opportunity Womenswear is “absolutely instrumental” to the global strategy, says Gass, who is dressed in a Levi’s denim jumpsuit when we meet. “We were historically known as a men’s brand. And we have been making tremendous inroads on the women’s side. We’re going to further amplify that strategy as we look forward,” she says. “We see it as an even greater opportunity to really own a head-to-toe denim lifestyle. For women, that’s jumpsuits like I’m wearing today that are really trending right now, but it’s also denim dresses, denim skirts… Womenswear today is about a third of our business and it should be at least half, and all our research would suggest that if we’re getting the female consumer to come in, she’s going to buy for the guys as well.” There’s also non-denim products, chino and the non-denim Tech pants, which are performance and active oriented. “It’s more share of the closet expanding beyond denim bottoms,” Gass notes. As part of the elevation strategy, the brand will unify its premium offering with a blue tab rather than its traditional red on the back pocket. It will continue to launch around six to eight fashion collaborations per year. Is the Western trend, fuelled by Pharrell Williams and Beyoncé, boosting business? “What’s helping us are our core strategies, but to your point, there’s a lot of buzz right now in denim and in Western and we’re excited to lean into that,” Gass says. “You can look at a couple of proof points like our Western shirts as an example, and those are up 40 per cent year-on-year. We’ve done marketing on our website, making it easier for consumers to find those Western trends. For sure, Western is having a moment. Levi’s is having a moment.” Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author: Givenchy appoints new CEO Richemont appoints new CEOs at Cartier and Van Cleef & Arpels Key takeaways from Autumn 2024 couture week

Make better business decisions

Make better business decisions