Levi Strauss and Co. SWOT & PESTLE Analysis

Strength

1. Iconic brand with strong appeal in the youth segment: Levi’s as a denim brand falls between the Gap and Ralph Lauren, catering to teenagers and youth in particular. As a brand, it has the highest brand awareness among global consumers, especially in the denim bottoms product category. It is recognized as an authentic and original lifestyle brand across product categories among its consumers. The company’s brands are a major contributor towards its long-term success, which is why to remain relevant in the VUCA world the company aims to keep re-inventing its brands. Under the company’s foray of innovation lie its core fits, like its iconic 501 jeans, as well as new fits which are yet to be introduced in the market. It has become the number one jeans wear brand globally, measured by total retail sales. Now with newer modifications, it is catering to different sections of consumers in the market. Although in 2019 the company continued to occupy the lead in men’s denim jeans, it also focused on the women’s section and expanded its share in the United States.

2. Wide global reach in more than 110 countries: L. S. & Co has penetrated in more than 110 countries around the world. The company manages its retail operations in these countries by categorizing them in three regions- Americas, Europe and Asia (which includes Middle-east and Africa). The company develops, sources and markets its products around the world, leveraging its global infrastructure to service its customers. The company has over 50,000 retail outlets worldwide, which include around 3,000 brand-dedicated stores and shop-in-shops. Different kinds of channels dominate the market in different country regions. For example, chain retailers and department stores are the dominant distribution channels for Levi’s and Dockers products in the United States. However, outside this region, specialty retailers, department stores franchised or brand-dedicated stores and shop-in-shops are primary channels of distribution. The company has also ventured into the online distribution channels, selling the products of these two brands through self and third-party operated websites.

3. Driving growth through diversification of business: L. S. & Co has a business which is diversified across products, geographies and channels. In the year 2019, of the total revenues 72% came from bottoms, 21% from tops, and remaining 7% was from footwear and accessories. Geographically, 53% of revenues came from America region, 31% came from Europe and 16% from Asia. Wholesale and DTC channels accounted for 64% and 36% of total revenues of the company. This diversification has resulted in rejuvenated growth in the company’s revenues. Growth rates across products varied in accordance to the growth stage of the product in the global market. While the bottoms, which are the flagship product of the Levi’s brand, grew at a CAGR of 3%, tops as a product has grown at a CAGR of 31% and footwear could achieve a modest CAGR of 6%. In the different geographic regions also, growth rates in the year 2019 show the penetration of the brand in the region. The American region registered a growth of 3%, out of which USA achieved a modest 1% growth. In contrast the company grew at 7% and 6% in Europe and Asia respectively. Wholesale channel registered a CAGR of 4% while on the other hand, DTC achieved a CAGR of 12%.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Focus on climate change and sustainability initiatives: Concentrations of carbon dioxide and other greenhouse gases are rising in the atmosphere. This rise, caused by emissions from factories and motor vehicles, is becoming a major cause for climate change all over the world. Changes in weather patterns and increase in frequency and severity of natural disasters are disrupting agricultural activities in countries around the world, especially those that are completely dependent on monsoons. Climate change has thus affected the production of cotton, which is the main component of cloth. Untimely monsoons lead to either late production of cotton, or destruction of crop which affects the whole supply chain of the apparel industry. In order to mitigate the risks associated with climate change, the company has to maintain larger safety stocks of cotton. This means more costs of warehousing, translating into lower margins.

2. Using sustainable materials in products: Consumers are becoming more environmentally conscious by the day. Part of this awareness has translated into a demand for sustainable products, which is true for the fashion industry also. According to an industry study, by 2025 the demand for sustainable clothes would reach up to 50% of clothes demanded for more than 50% of the players in the fashion industry. Levi’s has taken great strides in this direction by innovatively amalgamating sustainability with design. Levi’s Wellthread line, in its Spring/Summer season 2019, featured cottonized hemp –hemp treated to look and feel just like cotton- for the first time. The company has also confirmed that around 83% of its raw material is sourced from sustainable sources. It is the founding member of the Better Cotton Initiative, and sources a lot of organically grown and recycled cotton. The company has restricted its use of cellulosics to cover the “Green Shirt”. Additionally, it has ordered its suppliers to stop sourcing from ancient and endangered forest by the end of 2020.