Levi Strauss CEO Chip Bergh said on Thursday that the jeans manufacturer is looking for more space as commercial rental vacancies increase.
The San Francisco-based company is looking to expand its 40 stores and 200 outlets in the US to boost its direct-to-customer business, the president said.
“That’s a huge opportunity, especially with the, you know, the commercial real estate tsunami that’s happening right now,” Bergh told CNBC’s Jim Cramer in a “Mad Money” interview. According to data from Moody’s Analytics, vacancy in regional shopping centers rose to a record high of 11.4% in the first quarter, from 10.5% in the fourth quarter.
“It gives us the opportunity to secure great locations against great leases and we capitalize on that,” he said.
Direct sales to consumers accounted for about 40% of Levi’s total sales last year, the company said in February. For this year, Levi wants those sales to make up 60% of the total turnover.
Part of the new store’s rollout is what the company calls NextGen Stores. These are designed to be smaller, just 2,500 square feet, and equipped with machine learning to help with inventory, Bergh said.
“These really represent significant opportunities and we have stated that we will be led by DTC in the future,” he said. “It’s really critical to us, the gross margin contributes and we’re successful at it.”
Levi’s direct-to-consumer strategy spans the mainline and outlet stores, online operations and department stores it partners with. Sales in the category fell by 26% in the past quarter. The losses were due to less visitor numbers in the stores.