Levi Strauss CFO on Navigating Excess Inventory, His Expanded Role and Slower Hiring  

Levi Strauss this month said implementing the new system helped boost its net revenue for the quarter ended Feb. 26 to $1.69 billion, up 6% from the prior-year period. The company moved up certain wholesale shipments to the February quarter from the following one as part of the ERP setup, resulting in about $100 million in corresponding U.S. revenue being booked in the February quarter.

The apparel maker—which in 2019 returned to the public markets for the first time since 1985, when it was taken private in a leveraged buyout—faces high inventory levels, prompting it to discount certain products. It has said it is experiencing softening demand from its value-oriented customers.

The company, best known for its classic Levi’s 501 and 511 jeans, also sells apparel through larger retailers, with its lower-price Denizen and Signature products selling for between $20 and $30 at chains including Walmart Inc. and Target Corp. Direct-to-consumer revenue represented 42% of Levi Strauss’s total net revenue for the quarter ended Feb. 26, with wholesale accounting for the rest. 

Levi Strauss has said it aims to generate $9 billion to $10 billion in annual revenue by 2027. It booked revenue of $6.17 billion for the year ended in November, up 7% from the previous year.

The company has been more selective in recent months about hiring at the corporate level after its head count grew to about 18,000 people in November, up 8% from a year earlier.

CFO Journal talked to Chief Financial Officer

Harmit Singh,

who in January took on the additional role of chief growth officer, about his new responsibilities, the ERP system’s launch, and why the company is slowing down hiring. His responses have been edited for length and clarity. 

WSJ: Your role as CFO was expanded to include chief growth officer. What does that mean? 

Mr. Singh: My new role includes responsibilities of corporate strategy and global retail real estate. Thinking long term is critical. Last year, we talked about how this company can move from a $6 billion company to a $9 billion to $10 billion company. The global real-estate role is critical as you make this a direct-to-consumer-led company. Ensuring that we’re opening stores is the key part of how we grow.  

WSJ: As a result of shouldering these new responsibilities, what are you spending less time on? 

Mr. Singh: President Michelle Gass [who is set to become CEO] and I are spending a lot of time on: How do we get to the $9 billion to $10 billion? How do we ensure that there’s a road map and allocate responsibility to hold people accountable? The basic fundamentals are very sound. I’m spending clearly more time on the future and a little less time on the fundamentals. 

WSJ: How are you managing excess inventory?

Mr. Singh: At the end of the fourth quarter, our inventory growth year over year was 58% and we expected that to sequentially drop and it did. At the end of the first quarter, the inventory growth was 33%, so there was a 25-percentage-point drop. Our view is that the growth declines and gets very close to the sales growth, definitely by the end of the year if not earlier. This time last year, there was very little inventory and the volumes were really good for all retailers. Retailers planned slightly on the higher side than what the demand has turned out to be. That’s why there was a little bit more inventory build. 

We do think inventory will improve. We don’t want to be the top retailer in terms of offering promotions. But we want to make sure we are not uncompetitive. The consumer is likely resilient. Our direct-to-consumer channel is real strong. Our wholesale channel is probably a little weaker. It’s kind of panning out as we expected from that perspective. 

WSJ: Did your inventory position spur your move to upgrade your planning software? 

Mr. Singh: We had probably seven to eight different forms of ERP systems globally. They were very customized and systems were not talking to each other. It was not driving agility or consumer insight.

As for the new standardized platform, we’ve implemented this in Mexico in 2020 and Canada in 2021. Now we’re rolling it out in the U.S. and then taking it to Europe and Asia potentially a couple years later. I can see what’s happening in our distribution centers. I can see what’s happening in our stores that are open. 

WSJ: How does greater visibility into inventory movement help the business? 

Mr. Singh: This is the foundation to growing our e-commerce business. The data help not only the C-suite but also various levels of leadership across the organization. To me it’s very important that the folks who are closest to the consumer—whether it is our store managers, our operators on the ground or our distribution center operators—really know what’s happening. Having access to that data in real time will make a big difference. 

WSJ: What is an example of a finance-related task that the system will make easier? 

Mr. Singh: There is a task that used to take weeks but can now happen automatically in a matter of seconds. The task has to do with capturing and reconciling sales with customers. [Reconciliation involves comparing transactions a company recorded internally with supporting materials such as bank documents.] I think that really is important because it allows us to really focus on things that really matter. 

WSJ: You’re investing in some technology. Are you using ChatGPT for the finance function? 

Mr. Singh: We’re not yet in the finances using ChatGPT. We tend to experiment all the time, just to make sure that we use algorithms to help us make decisions that will allow us to compete in the marketplace. We do use algorithms, to help us financially forecast. It doesn’t replace commercial judgment. Machine learning helps us forecast and allows our financial planning and analysis people around the world to determine what’s the right forecasting and helps drive or improve forecasting accuracy. We started that a couple of years ago. 

WSJ: Are you changing your approach to hiring? 

Mr. Singh: We’ve slowed down hiring at the corporate level other than for critical positions. We continue to hire key critical replacements at all levels. You have somebody that helps you close your books and if that person leaves, you’ve got to replace that person. Slowness in hiring will probably remain in place through the year and that’s just one of the things we’re doing.

We will look at all discretionary costs, but we’re not compromising on things that can continue to unlock profitable growth for the company. We’re still going to be opening, on a net basis, 80 stores [worldwide this fiscal year] across our three brands [Levi’s, Dockers and Beyond Yoga], because it really helps propel the direct-to-consumer business. 

Write to Mark Maurer at [email protected]

Levi Strauss this month said implementing the new system helped boost its net revenue for the quarter ended Feb. 26 to $1.69 billion, up 6% from the prior-year period. The company moved up certain wholesale shipments to the February quarter from the following one as part of the ERP setup, resulting in about $100 million in corresponding U.S. revenue being booked in the February quarter.

The apparel maker—which in 2019 returned to the public markets for the first time since 1985, when it was taken private in a leveraged buyout—faces high inventory levels, prompting it to discount certain products. It has said it is experiencing softening demand from its value-oriented customers.

The company, best known for its classic Levi’s 501 and 511 jeans, also sells apparel through larger retailers, with its lower-price Denizen and Signature products selling for between $20 and $30 at chains including Walmart Inc. and Target Corp. Direct-to-consumer revenue represented 42% of Levi Strauss’s total net revenue for the quarter ended Feb. 26, with wholesale accounting for the rest. 

Levi Strauss has said it aims to generate $9 billion to $10 billion in annual revenue by 2027. It booked revenue of $6.17 billion for the year ended in November, up 7% from the previous year.

The company has been more selective in recent months about hiring at the corporate level after its head count grew to about 18,000 people in November, up 8% from a year earlier.

CFO Journal talked to Chief Financial Officer

Harmit Singh,

who in January took on the additional role of chief growth officer, about his new responsibilities, the ERP system’s launch, and why the company is slowing down hiring. His responses have been edited for length and clarity. 

WSJ: Your role as CFO was expanded to include chief growth officer. What does that mean? 

Mr. Singh: My new role includes responsibilities of corporate strategy and global retail real estate. Thinking long term is critical. Last year, we talked about how this company can move from a $6 billion company to a $9 billion to $10 billion company. The global real-estate role is critical as you make this a direct-to-consumer-led company. Ensuring that we’re opening stores is the key part of how we grow.  

WSJ: As a result of shouldering these new responsibilities, what are you spending less time on? 

Mr. Singh: President Michelle Gass [who is set to become CEO] and I are spending a lot of time on: How do we get to the $9 billion to $10 billion? How do we ensure that there’s a road map and allocate responsibility to hold people accountable? The basic fundamentals are very sound. I’m spending clearly more time on the future and a little less time on the fundamentals. 

WSJ: How are you managing excess inventory?

Mr. Singh: At the end of the fourth quarter, our inventory growth year over year was 58% and we expected that to sequentially drop and it did. At the end of the first quarter, the inventory growth was 33%, so there was a 25-percentage-point drop. Our view is that the growth declines and gets very close to the sales growth, definitely by the end of the year if not earlier. This time last year, there was very little inventory and the volumes were really good for all retailers. Retailers planned slightly on the higher side than what the demand has turned out to be. That’s why there was a little bit more inventory build. 

We do think inventory will improve. We don’t want to be the top retailer in terms of offering promotions. But we want to make sure we are not uncompetitive. The consumer is likely resilient. Our direct-to-consumer channel is real strong. Our wholesale channel is probably a little weaker. It’s kind of panning out as we expected from that perspective. 

WSJ: Did your inventory position spur your move to upgrade your planning software? 

Mr. Singh: We had probably seven to eight different forms of ERP systems globally. They were very customized and systems were not talking to each other. It was not driving agility or consumer insight.

As for the new standardized platform, we’ve implemented this in Mexico in 2020 and Canada in 2021. Now we’re rolling it out in the U.S. and then taking it to Europe and Asia potentially a couple years later. I can see what’s happening in our distribution centers. I can see what’s happening in our stores that are open. 

WSJ: How does greater visibility into inventory movement help the business? 

Mr. Singh: This is the foundation to growing our e-commerce business. The data help not only the C-suite but also various levels of leadership across the organization. To me it’s very important that the folks who are closest to the consumer—whether it is our store managers, our operators on the ground or our distribution center operators—really know what’s happening. Having access to that data in real time will make a big difference. 

WSJ: What is an example of a finance-related task that the system will make easier? 

Mr. Singh: There is a task that used to take weeks but can now happen automatically in a matter of seconds. The task has to do with capturing and reconciling sales with customers. [Reconciliation involves comparing transactions a company recorded internally with supporting materials such as bank documents.] I think that really is important because it allows us to really focus on things that really matter. 

WSJ: You’re investing in some technology. Are you using ChatGPT for the finance function? 

Mr. Singh: We’re not yet in the finances using ChatGPT. We tend to experiment all the time, just to make sure that we use algorithms to help us make decisions that will allow us to compete in the marketplace. We do use algorithms, to help us financially forecast. It doesn’t replace commercial judgment. Machine learning helps us forecast and allows our financial planning and analysis people around the world to determine what’s the right forecasting and helps drive or improve forecasting accuracy. We started that a couple of years ago. 

WSJ: Are you changing your approach to hiring? 

Mr. Singh: We’ve slowed down hiring at the corporate level other than for critical positions. We continue to hire key critical replacements at all levels. You have somebody that helps you close your books and if that person leaves, you’ve got to replace that person. Slowness in hiring will probably remain in place through the year and that’s just one of the things we’re doing.

We will look at all discretionary costs, but we’re not compromising on things that can continue to unlock profitable growth for the company. We’re still going to be opening, on a net basis, 80 stores [worldwide this fiscal year] across our three brands [Levi’s, Dockers and Beyond Yoga], because it really helps propel the direct-to-consumer business. 

Write to Mark Maurer at [email protected]