During a Q2 2024 fiscal earnings conference call, Harmit Singh, chief financial and growth officer at clothing company Levi Strauss & Co., revealed the company’s intention to move away from its primarily owned-and-operated distribution and logistics network in the US and Europe.
In place of this, Singh explained that the company will be moving to a structure that is “more balanced” between the firm’s own logistics network and “leading third-party logistics providers (3PLs)”. He went on to say: “As we continue our pivot to a DTC-first company, our distribution networks need investment including upgrading existing capacity with omnichannel capabilities.
“A new strategy allows us to secure these investments in a capital-efficient manner by leveraging third-party capital while freeing up our own resources to invest in growing the direct-to-consumer channel.
“This will also enable us to reduce our fulfilment costs per unit compared to running the facilities ourselves, while immediately delivering a cash infusion of over US$90 million this year, primarily as a reimbursement of the capital spent to build a new distribution centre in Germany.”
In May, GXO announced a 20-year partnership agreement with Levi Strauss & Co. to manage operations at the new ‘fully-automated’ Dorsten Distribution Centre in Germany.
Construction of this c. 750,000ft² facility began in 2022, with GXO claiming that the site is expected to create up to 650 jobs at full capacity in 2026. Initially starting with a capacity of 33 million units, the facility is expected to reach a capacity of 55 million units by 2026.
Craig Jones, senior vice president of global distribution and logistics at Levi Strauss & Co., said: “The Dorsten Distribution Centre will support our strategic priority of being a direct-to-consumer led retailer by accelerating our omnichannel capabilities in Europe.
“With GXO taking over management of the facility, we have full confidence that this goal will be effectively supported by best-in-class operations that address our logistics ambitions with technologically advanced supply chain and e-commerce solutions.
“With this agreement, LS&Co. also reaffirms continuous efforts to reduce the environmental impact of our operations across the supply chain.”
Levi Strauss & Co.’s Dorsten Distribution Centre has LEED and WELL Health-Safety certification, featuring ‘sustainably sourced concrete, walls of vegetation, rooftop solar panels and a green roof, as well as access to electric vehicle chargers, an on-site park and advanced recycling facilities’.
Richard Cawston, chief revenue officer at GXO, added: “This significant partnership with Levi Strauss & Co. will help accelerate their omnichannel growth across Europe and advances our growth ambitions in Germany.
“This fully-automated site is among the greenest distribution centres in all of Europe with phenomenal sustainability features that raise the bar in the logistics industry.
“Together, we share a commitment to creating an inclusive and dynamic culture that will drive growth for both colleagues and the community.”
Levi Strauss & Co. reported that for Q2 2024, net revenues of $1.4 billion were 8% higher on a reported basis and 9% higher on a constant-currency basis compared Q2 2023.
In the Americas, net revenues increased 17% on a reported basis and 16% on a constant-currency basis, while in Europe net revenues decreased 2% on a reported and constant-currency basis, reflecting a sequential improvement from Q1 across both wholesale and DTC.
When these financial results were released, Michelle Gass, president and CEO of Levi Strauss & Co., commented: “We delivered another strong quarter driven by the Levi’s brand’s prominence at the centre of culture, a robust pipeline of newness and innovation, and continued momentum in our global direct-to-consumer channel.
“Our amplified focus on women’s and denim lifestyle is delivering outsized growth and driving meaningful market share gains.
“Our transformational pivot to operating as a DTC-first company is yielding positive results around the world, giving me great confidence that we will achieve accelerated, profitable growth for the rest of the year and beyond.”
The financial results announcement identified that the transition away from a primarily owned-and-operated distribution and logistics network to a “more balanced” operation is part of Project Fuel, the company’s ‘ongoing global productivity initiative’.
It explained that ‘in the near term, these changes require the parallel operation of new and old facilities for the rest of 2024, resulting in a transitory increase in distribution costs’.
Following the undeniable success of IntraLogisteX 2024 in the UK, the exhibition is heading across the Atlantic later in the year, with IntraLogisteX USA taking place on 22-23 October 2024 at Miami Beach Convention Centre.
Click here for more details and to register!
Plus, the Supply Chain Excellence Awards are also heading stateside as Miami welcomes the very first Supply Chain Excellence Awards USA on 21 October 2024.
For more information about the awards, categories and how to enter, click here!
