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Levi Strauss & Co. CFO: ‘We came in as a winner and will emerge as a winner’

As we near the road to recovery, Harmit Singh, Levi Strauss & Co. CFO, joins Yahoo Finance to discuss Levi’s plan to come out on top following the coronavirus pandemic. He also shares how the consumer experience may be a little different, including the possibility of curbside pickup.

Video Transcript

BRIAN SOZZI: Well, retail has certainly hit a rough patch at the hands of the COVID-19 pandemic, but not all retail brands will suffer the same fate coming out of the crisis. In fact, some might actually thrive. Joining us now is Harmit Singh, Levi's CFO.

Harmit, good to speak with you again. Appreciate you taking the time this morning. Take us through-- we're starting to get some retailers announcing that they're going back opening for business. What does this restart for retail look like? Should we expect a lot of discounting over the next couple months?

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HARMIT SINGH: Well, good morning, Brian, Alexis. Thank you for having me on your show. I hope you and your families are safe and healthy.

In terms of, you know, Levi's and how we weathering the crisis and your question, our top priority is the safety and health of our employees, consumers, and the communities in which we operate. You know, we are approaching our store openings very deliberately and very thoughtfully. And we're going to follow [INAUDIBLE] lead. This may mean that we start off with curbside pickup in many stores in the US or opening with reduced hours.

You know we, also have a playbook that we're learning from China and Europe. You know, most of our stores in China are open. In Europe, we have about 100 stores open. And we're developing a rigorous protocol on deep cleaning for all of our stores, ensuring our employees have hand sanitizers, masks, and gloves, and practice social distancing.

And we're picking up consumer preferences and behavior. In Europe, for example, we're learning that consumers prefer individual service versus self-service. So when they walk in, they want to be serviced. We're doing it with social distancing protocols. And importantly, the consumers are walking in with an intent to purchase. So our units per transaction, our conversion rates are higher than, you know, average standard.

And importantly, they're coming in with a good mood. They want to shop. So that's the good stuff.

Your question about the right balance between markdowns and revenue. We walked into the crisis position of strength. Our inventory levels were 7% down. And importantly, a large percentage of our products are core. So think 501s. Think the trucker jackets like I'm wearing. And we're going to balance that to drive revenues and ensure that we continue to maintain the brand momentum and strength.

And even in the last Easter promotion that recently happened in the US, our discount levels were far lower than what was in the market. And consumers continue to buy through our digital platforms.

ALEXIS CHRISTOFOROUS: Harmit, I'm hoping you can talk to us a little bit about the future of Levi. You know, it's been part of the retail landscape for decades. How does it come out of this pandemic? Because we're learning, with each passing day, that a number of iconic brands will probably not survive. We just saw J Crew say that it's going to have to file for bankruptcy. What does the balance sheet at Levi's look like, and how do you expect the company to look post this pandemic?

HARMIT SINGH: Yeah, sure. So, you know, we're going to leverage our strengths to remain a winner in the industry. We came in as a winner, and we believe we'll emerge as a winner. So 167 years in the business, and as a company, we're built to last.

We have faced many crises in the past. This is my fifth recession. Our playbook is all about managing through the crisis by preserving cash and protecting profits while emerging stronger on the other side. As a brand, we have huge momentum. We continue to connect with our consumers through our virtual music festival, the 5:01, which is being screened on Instagram on a daily basis.

Our balance sheet, to your question. We came into the crisis with liquidity close to, you know, $2 billion. Over the last two weeks, I've bolstered the balance sheet and raised another half a billion dollars. One learning has been you raise cash when you don't need it. The half a billion dollars allows us to play defense, and as an insurance should things worsen, or offense as we emerge out. And that is dry powder for things we'd like to

Do. So we feel good about the balance sheet. We feel great about the brands. We are doing everything else that others are doing. We're cutting discretionary costs and capital. And because we are a global company as I mentioned earlier, we are learning from markets like China and Europe as they reopen and bring those practices to bear in the US, when US gets ready to reopen.

BRIAN SOZZI: Harmit, in 30 seconds here, that's a lot of dry powder. That is a lot of capital on your balance sheet. What are you buying? Are you out there buying full-on brands, new retail stores? What does it look like?

HARMIT SINGH: Yeah, I think the first port of call, Brian, is to manage through the crisis. And you know, that's important. The second is, as we have-- one of our strategies has been M&A. We start with organic M&A, which is all about buying back franchises, buying back distributors. We bought the distributor in Latin America. Is taking back product licenses, which strengthens our brands, is closer to home.

And then longer term, you know, we think about growing categories like outerwear, footwear, tops, and women's, all categories we're under-penetrated in. And that's something that we'll focus on in the long term. But in the short term, it's all about strengthening who we are and emerging out of this, laying the foundation to emerge much stronger.

BRIAN SOZZI: All right, let's leave it there. Levi's CFO Harmit Singh. Always good to speak with you. We'll talk to you soon, and please stay safe.

HARMIT SINGH: Thanks, Brian and Alex. Bye-bye.