WEBVTT - Levi's CEO Michelle Gass Talks Direct-to-Consumer Strategy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Thank you, Harry, thank you Hulu, thank you FX, thank you,

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<v Speaker 2>Love Story, and more. We want to talk about Levi

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<v Speaker 2>Straussen Guvey Company's latest results really knocking the socks off investors.

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<v Speaker 2>The stock is up the most in one year, as

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<v Speaker 2>the company raised its projections for the year after reporting

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<v Speaker 2>better than expected quarterly results. They cited strong demand in

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<v Speaker 2>all regions as the dead and brand steershoppers to its

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<v Speaker 2>own stores and website. We're going to talk about that

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<v Speaker 2>a lot. Company reporting revenues of one point seven billion

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<v Speaker 2>in the fiscal quarter that exceeded the average of analyst estimates.

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<v Speaker 2>Earnings per share also excluding some items surpassing expectations. The

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<v Speaker 2>stock now up about seven percent year to date and

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<v Speaker 2>has gained nearly eighty percent in the past twelve months. YEP,

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<v Speaker 2>for those watching right now, it is up more than

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<v Speaker 2>eleven percent. Tim in today's session.

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<v Speaker 1>With us is the president and CEO of Levi Strauss

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<v Speaker 1>and Co. She's also a member of the company's board.

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<v Speaker 1>She's former CEO of Cole. She spent close to seventeen

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<v Speaker 1>years too at Starbucks. We've got Michelle Goss here in

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<v Speaker 1>the Judio. Welcome. It's good to see you. The stock soaring,

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<v Speaker 1>investors are liking what they see. Where did the momentum

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<v Speaker 1>come from, and what's really working right now?

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<v Speaker 3>Yeah, well, first thanks thanks for having me, and I'm

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<v Speaker 3>really excited to talk about how we started the year.

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<v Speaker 3>You know, we are seeing momentum across the board, which

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<v Speaker 3>is around our strategies really picking up and accelerating. So

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<v Speaker 3>we delivered nine percent organic growth fourteen percent on a

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<v Speaker 3>reported basis. We are seeing this across geographies. We're seeing

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<v Speaker 3>this across categories. We're seeing across genders. Why are seeing

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<v Speaker 3>across channel?

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<v Speaker 2>Why is this happening?

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<v Speaker 4>Well, you know it's the brand.

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<v Speaker 3>Yeah, it's the product, and it's the execution and all

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<v Speaker 3>of those things are working. And I got to tell

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<v Speaker 3>you the team is doing a phenomenal job. We're coming

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<v Speaker 3>off of a solid year last year and it's accelerating

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<v Speaker 3>right into twenty twenty six.

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<v Speaker 2>Michtill Dennan, though, is such a crowded category, Like I

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<v Speaker 2>won't go to certain department stores or because it's just

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<v Speaker 2>too much for me, but I do.

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<v Speaker 4>Go to Levi's and I thank you for that.

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<v Speaker 2>You're welcome, You're welcome. And I to you coming in

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<v Speaker 2>my twenty three year old. She's wearing them. That's where

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<v Speaker 2>she wants to go. You talked about your wife like

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<v Speaker 2>you are hitting a lot of different demographics. How do

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<v Speaker 2>you do that? How do you appeal to so many?

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<v Speaker 4>Yeah?

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<v Speaker 3>Well, I would say it does start with the brand,

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<v Speaker 3>and we like to say that Levi's operates at the

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<v Speaker 3>center of culture and we're hitting a new stride with

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<v Speaker 3>the brand. I mean, the brand has been strong for

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<v Speaker 3>a long time. Last year it went up a notch.

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<v Speaker 3>We had this fantastic partnership with Beyonce that moved into

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<v Speaker 3>a partnership with Shabouzi.

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<v Speaker 4>And this year we.

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<v Speaker 3>Launched our brand campaign at the Super Bowl and it

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<v Speaker 3>was the perfect time because Levi's stadium was hosting the

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<v Speaker 3>Super Bowl and we hadn't been on the Super Bowl

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<v Speaker 3>in over twenty years. But it wasn't about launching an

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<v Speaker 3>ad for the Super Bowl. It was about launching our

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<v Speaker 3>campaign and we call it Behind Every Original, which is

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<v Speaker 3>a global campaign and leans into what Levi's does best

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<v Speaker 3>across sports, across fashion and music, and so if you've

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<v Speaker 3>seen the ad really does bring that to life and

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<v Speaker 3>has artists like Doshi or SGA style great and Rosie.

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<v Speaker 4>And I like to talk about Rosie because here is this.

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<v Speaker 3>She was part of Black Pink ninety million followers and

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<v Speaker 3>growing and we're rolling that right into a collaboration with

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<v Speaker 3>her in Asia. So that is taking off as we speak.

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<v Speaker 3>And so this is about launching, like I said, a

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<v Speaker 3>campaign for the year looking ahead.

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<v Speaker 4>We've got World.

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<v Speaker 3>Cup coming up that the stadium is Levi Stadium is hosting.

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<v Speaker 3>We have collaborations. You know, we had our collaboration with

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<v Speaker 3>Nike and Jordan a couple months ago. We had people

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<v Speaker 3>lining out the doors to get the special clab.

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<v Speaker 1>Michelle. When you talk about these partnerships with celebrities, with

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<v Speaker 1>the artists, I know each one of them is different,

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<v Speaker 1>but in general, are they coming to you or are

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<v Speaker 1>you identifying them and you're going to them? How organic

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<v Speaker 1>is it?

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<v Speaker 4>It's it's it's all of the above. Well so, and

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<v Speaker 4>it happens organically.

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<v Speaker 3>I mean literally, what just at the Brits we had

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<v Speaker 3>Harry's Styles, Dan all wearing five O ones. I mean,

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<v Speaker 3>this is about being at the center of culture and

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<v Speaker 3>the Beyonce partnership that started because she wrote a song

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<v Speaker 3>called Levi's Jeans but we've been friends with Beyonce for decades,

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<v Speaker 3>back back to the nineties, or Carolyn Bassett. We're the

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<v Speaker 3>five seventeen's and you know in Love Story it's heavily

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<v Speaker 3>featured and sales are up like twenty five percent.

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<v Speaker 2>Did that surprise you, like? And when did you first

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<v Speaker 2>all of a sudden notice, Like we've talked about this on.

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<v Speaker 4>Air, the ad pack of this. Yeah, well, the nineties.

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<v Speaker 3>We've known about the nineties trend for a long time,

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<v Speaker 3>and in fact, when you go into our stores online,

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<v Speaker 3>go into our wholesale partners, I mean that nineties trend

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<v Speaker 3>is all Levi's is all over it, from top to bottom.

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<v Speaker 3>I mean one of the things we talk about when

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<v Speaker 3>you ask about what's working, we talk about our two

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<v Speaker 3>key strategies, which is about becoming a more DTC forward

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<v Speaker 3>company and also evolving the brand from being about jeans

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<v Speaker 3>to head to toe. We say denim lifestyle. What does

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<v Speaker 3>that mean. It means that we want to give you

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<v Speaker 3>the whole wardrobe. It starts with the genes, but tops,

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<v Speaker 3>button downs, jackets, outwear dresses all through the lens of Levi's.

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<v Speaker 4>But we're playing now in the total apparel space.

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<v Speaker 2>Michelle.

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<v Speaker 1>Perhaps that's a good segue to talk about the macroeconomic

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<v Speaker 1>environment and potential disruptions or disruptions you've seen from higher

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<v Speaker 1>transportation costs as a result of bringing these products from

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<v Speaker 1>overseas into the US and indeed around the world. What

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<v Speaker 1>has this macroeconomic backdrop over the last five six weeks

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<v Speaker 1>done for your business?

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<v Speaker 3>Yeah, well, over the last year, I think it's been

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<v Speaker 3>a really uncertain time. You know, I take a step back.

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<v Speaker 3>You think about the company LS and Co. We've been

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<v Speaker 3>around for one hundred and seventy years. We've weathered lots

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<v Speaker 3>of storms and navigated, and it goes back to who

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<v Speaker 3>we are as a brand. During times like this, people

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<v Speaker 3>do we have to deliver, we have to execute, but

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<v Speaker 3>they really do go to brands that they trust, that

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<v Speaker 3>they love. We offer quality, we offer a great value,

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<v Speaker 3>We offer durability.

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<v Speaker 4>To date, our.

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<v Speaker 3>Consumer has proven resilient. I mean you see that in

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<v Speaker 3>our numbers. You know, we are bringing them a lot

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<v Speaker 3>of innovation. I think, you know, if pressures come on

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<v Speaker 3>the can sooner, when when the wallets get tighter, you

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<v Speaker 3>know we have to up our game, right, wallets get tighter,

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<v Speaker 3>we have to work harder and that's what we're doing.

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<v Speaker 3>We offer great Red Tab right down the middle. We

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<v Speaker 3>offer Signature by Levi Strauss, which is an awesome value.

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<v Speaker 3>That business was up sixteen percent. It's in the twenty

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<v Speaker 3>twenty five dollars range. And then we offer Blue Tab

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<v Speaker 3>premium Japanese denim. And you know, you can buy a

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<v Speaker 3>pair of Jings from Leo's now at like two hundred dollars.

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<v Speaker 3>So we're serving every customer need. But know that we

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<v Speaker 3>are constantly just making sure that we can address the

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<v Speaker 3>needs of the consumer in the moment, whatever that moment

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<v Speaker 3>might be.

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<v Speaker 2>Love talking fashion, love talking to the collaborations. I also, though,

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<v Speaker 2>do love the nitty gritty of like supply chains and

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<v Speaker 2>what's a company like you that has been around for

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<v Speaker 2>so long and seen a lot of different market cycles.

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<v Speaker 2>What is your supply chain and have you kind of

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<v Speaker 2>spread it around based on what we've seen not just

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<v Speaker 2>in the last year, but even coming off the pandemic,

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<v Speaker 2>that reminded us that supply chains can be impacted dramatically

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<v Speaker 2>when they're focused in one area.

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<v Speaker 4>Yeah, that's right.

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<v Speaker 3>We have a robust, very diversified supply chain across many

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<v Speaker 3>many countries. We have a really strong team that is

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<v Speaker 3>agile and responsive and so and these these relationships with

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<v Speaker 3>our suppliers go back decades and decades.

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<v Speaker 4>So we have tremendous partnerships.

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<v Speaker 3>And as we've navigated things like tariffs, everybody has stepped

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<v Speaker 3>up to help us, you know, determine what the next

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<v Speaker 3>steps are there, you know, just to put it out

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<v Speaker 3>there on tariffs. I mean, everything that we've got to

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<v Speaker 3>the street includes tariff assumptions on call it the original

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<v Speaker 3>reciprocal tariffs at a higher rate, at that twenty percent

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<v Speaker 3>incremental rate. You know, there's been recent news of it

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<v Speaker 3>going down back to ten percent. We haven't baked that

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<v Speaker 3>into our numbers yet. One could say that is upside

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<v Speaker 3>there could mean up to thirty five million dollars in

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<v Speaker 3>ebit or seven cents of EPs, but we've held back

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<v Speaker 3>just knowing that there still is uncertainty out there.

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<v Speaker 4>As you were saying.

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<v Speaker 1>One question we asked up going cfo Hermeat saying in

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<v Speaker 1>the last year and the wake of tariffs has been

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<v Speaker 1>about moving production to the United States. Dates he said,

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<v Speaker 1>no way, that's not happening. Are you sticking by that?

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<v Speaker 4>We are sticking by that.

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<v Speaker 3>Yeah, that is an industry that really has shifted overseas.

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<v Speaker 3>And like I said, because we have these enduring, long

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<v Speaker 3>lasting relationships, I know we'll be able to navigate whatever's

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<v Speaker 3>ahead on that front.

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<v Speaker 2>All right, So you know a company like you, guys,

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<v Speaker 2>our whole Bloomberg team is like, ask Michelle, this says,

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<v Speaker 2>but we're curious about your prospects for reaching ten billion

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<v Speaker 2>in revenue five years, seven years. How are you guys

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<v Speaker 2>thinking about it?

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<v Speaker 4>We have not put a number out there, but you're

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<v Speaker 4>a date out there.

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<v Speaker 2>Meanton, like, do you think you can get this momentum?

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<v Speaker 2>And how far can you carry it out? Do you

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<v Speaker 2>feel comfortable?

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<v Speaker 3>Yeah?

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<v Speaker 4>What I can say, and we have.

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<v Speaker 3>I think it's important to have bold goals, right, So

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<v Speaker 3>we've put the ten billion, we've put the fifteen percent EBIT.

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<v Speaker 3>I think if you look at the progress over the

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<v Speaker 3>last couple of years, take revenue. We came off of

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<v Speaker 3>seven percent growth last year, that was up from the

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<v Speaker 3>prior year. This year we're again guiding mid single digits.

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<v Speaker 3>We just had a blowout quarter at up nine percent.

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<v Speaker 3>So I think it's safe to say that you can

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<v Speaker 3>count on consistent sustainable growth and then on EBIT. On profitability.

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<v Speaker 3>We're making that march to fifteen percent again. A few

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<v Speaker 3>years ago we were nine ten percent. Last year about

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<v Speaker 3>eleven and a half. We've put them. We just said

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<v Speaker 3>we're taking our guide up yesterday to twelve percent. So

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<v Speaker 3>you see that sequential progress and you know, keep doing that.

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<v Speaker 4>We'll let you guys do the math. Were but we're content.

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<v Speaker 3>I mean, like I said, the exciting thing we are

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<v Speaker 3>if you have visibilit the strategies are working.

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<v Speaker 4>We've made some choices the last couple of years.

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<v Speaker 3>We've you know, we sold the Doctor's brand so that

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<v Speaker 3>we could really focus on the Levi's brand.

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<v Speaker 4>And there's so much opportunity.

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<v Speaker 1>So certainly fashion is working in your favor right now.

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<v Speaker 1>But we know the industry is fickle and consumers are fickle.

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<v Speaker 1>What happens or what do you do rather to make

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<v Speaker 1>sure that when the trends do change, you move with them.

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<v Speaker 4>Yeah.

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<v Speaker 3>Well, as the category leader in denim, let's art there,

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<v Speaker 3>it's our responsibility to fuel the trends. You know, the

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<v Speaker 3>detam category is growing, it's accelerating, right.

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<v Speaker 2>We have more denim in my no serious, my wardrobe

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<v Speaker 2>that I have in a long long time, and I

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<v Speaker 2>keep buying.

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<v Speaker 3>But I would say, though this, but this evolution to

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<v Speaker 3>denim lifestyle or I'll say lifestyle head to toe, that's

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<v Speaker 3>not all denim, right, It is fine if you're buying

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<v Speaker 3>a ribcage, wide leg pair of jeens, what's the perfect

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<v Speaker 3>top that goes with it?

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<v Speaker 4>Which is going to be different than a low rise.

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<v Speaker 3>And so now that we're playing in this broader space,

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<v Speaker 3>which basically increases our addressable market by fifteen x, we're

0:10:28.160 --> 0:10:31.400
<v Speaker 3>playing in a one trillion market in apparel that requires

0:10:31.440 --> 0:10:35.080
<v Speaker 3>focus and discipline. But we really up leveled our capabilities

0:10:35.080 --> 0:10:36.880
<v Speaker 3>to do that. And you know, if you just take

0:10:36.920 --> 0:10:40.120
<v Speaker 3>this last quarter, our top's business was up thirteen percent,

0:10:40.640 --> 0:10:42.880
<v Speaker 3>it's only twenty percent of our business.

0:10:42.880 --> 0:10:44.199
<v Speaker 4>So when you think about all that.

0:10:44.280 --> 0:10:46.959
<v Speaker 3>Upside, so we now and forty percent of our business

0:10:47.000 --> 0:10:51.200
<v Speaker 3>is non denim, so it's not just denim anymore for Levi's.

0:10:51.200 --> 0:10:51.839
<v Speaker 4>So what is the.

0:10:51.760 --> 0:10:54.680
<v Speaker 2>Biggest opportunity or categories that are not yet tapped that

0:10:54.760 --> 0:10:56.200
<v Speaker 2>could be big for you guys?

0:10:56.400 --> 0:10:58.160
<v Speaker 4>Yeah, I would say a couple of things.

0:10:58.200 --> 0:11:01.840
<v Speaker 3>First, when we think about gender, women's is not quite

0:11:01.840 --> 0:11:05.079
<v Speaker 3>forty percent of our business. Last I checked, women's has

0:11:05.120 --> 0:11:06.559
<v Speaker 3>a big play in the apparel market.

0:11:06.600 --> 0:11:07.720
<v Speaker 2>Clause it's a lot bigger than my.

0:11:09.200 --> 0:11:09.680
<v Speaker 4>Just saying.

0:11:10.080 --> 0:11:12.600
<v Speaker 3>But so there's still that should be at least half

0:11:12.600 --> 0:11:16.440
<v Speaker 3>our business. So we're expecting tremendous growth there. I was

0:11:16.520 --> 0:11:20.120
<v Speaker 3>just talking about head to toe. We always will be

0:11:20.120 --> 0:11:23.480
<v Speaker 3>the leader in bottoms and den and bottoms, but tops.

0:11:23.920 --> 0:11:27.040
<v Speaker 3>So in our business we sell two bottoms to every top,

0:11:27.040 --> 0:11:28.760
<v Speaker 3>which by the way, that used to be like five

0:11:29.040 --> 0:11:31.040
<v Speaker 3>five bottoms to every top. That should be the other

0:11:31.080 --> 0:11:33.960
<v Speaker 3>way around, minimally one to one. That is all white

0:11:34.000 --> 0:11:36.920
<v Speaker 3>space for us. And then we have amazing growth ahead

0:11:36.920 --> 0:11:39.559
<v Speaker 3>of us in expansion. You know, there's still room to

0:11:39.559 --> 0:11:42.080
<v Speaker 3>grow in the US, but you think about these international markets.

0:11:42.120 --> 0:11:44.720
<v Speaker 3>In some cases we're just getting started there. So as

0:11:44.800 --> 0:11:46.800
<v Speaker 3>we look ahead and say, how are we going to

0:11:46.840 --> 0:11:49.880
<v Speaker 3>go from six points something to ten billion, we can

0:11:50.000 --> 0:11:51.439
<v Speaker 3>chart that out and we feel very confident.

0:11:51.880 --> 0:11:53.520
<v Speaker 2>Thank you, thank you, please come back soon.

0:11:53.800 --> 0:11:55.360
<v Speaker 4>We would like you well. Thanks for having me.

0:11:55.440 --> 0:11:59.160
<v Speaker 2>Yeah, we loved it, President CEO of Levi Strauss and Company.

0:11:59.160 --> 0:12:01.120
<v Speaker 2>Of course, she is Miche joining us here in the

0:12:01.160 --> 0:12:01.520
<v Speaker 2>studio