Levi’s CEO on navigating supply chain issues: “it’s a game of whack-a-mole”

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Jul 9, 2021
  • Levi's beats Wall Street estimates in fiscal Q2 and raises full-year guidance.
  • CEO Bergh discusses supply chain issues on CNBC's "Squawk on the Street".
  • Shares of the company opened 5% up but lost all gain in the next hour.

Levi Strauss & Co (NYSE: LEVI) beat Wall Street estimates in its fiscal second quarter and raised its guidance for the full year on Thursday. On the back of hawkish quarterly performance, the American clothing company also raised its dividend by 2 cents to 8 cents per share for the third quarter.

CEO Chip Bergh’s remarks on CNBC’s “Squawk on the Street”

In his interview with CNBC, CEO Chip Bergh acknowledged that supply chain issues (both COVID and supplier-related) had been a challenge but lauded his team for helping Levi’s navigate through it ‘much better than most of the industry’.  

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“We have a very diversified supply base. We operate in over 20 countries. We’ve locked in all of our costs now through the first half of the next fiscal year. We’ve locked in most of our manufacturing capacity. But it’s a little bit of a game of whack-a-mole. As COVID hits and shuts down a particular market, we’ve got to be quick and agile and responding,” Bergh said on “Squawk on the Street”.

Levi’s $1.3 billion revenue in Q2 saw a negative impact of $8 million due to the supply chain issues, which Bergh shrugged off as “negligible”. The chief executive also expressed confidence in the inventory that he said was finished down 12% this quarter.

“We’ll see inventory being to build towards the end of the second half of the year as we prepare for what we think is going to be a pretty strong next fiscal year.”

Weight fluctuations fuelled demand for new clothes

According to CEO Bergh, many Americans saw a change in waist size (some up, some down) over the past 16 months as the pandemic restricted people to their homes. This weight fluctuation created demand for new clothes. In the future, he added, sales are likely to remain strong as vaccine rollouts enable people to go out, travel, and plan get-togethers again.

Shares of the $11.29 billion company opened 5% up on Friday but lost the entire intraday gain in the next hour.

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