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Levi Strauss Bullish on Next-Gen Retail

The direct-to-consumer stores focus on local personalization, customization and digitalization.

Levi Strauss  (LEVI) - Get Levi Strauss & Co. Class A Report has high hopes for its emerging next-gen retail locations.

 Chip Bergh, president and CEO of Levi Strauss, told Jim Cramer on a recent episode of "Mad Money" that these smaller-footprint stores offer customized products for the local market. Next-gen locations are proving to be highly profitable, he said.

In 2019, the company launched its first six NextGen pilot stores across Europe and Asia. In September 2020 the first store came to the U.S., and they are now growing. The effort is part of Levi’s retail shift to direct-to-consumer and away from wholesale. 

On Real Money, Bruce Kamich spotted a positive signal in share prices ahead of the company's latest earnings report. "I have no special knowledge of what earnings will be for LEVI, but the decline in LEVI now looks mature and with earnings numbers next week, bearish traders may be surprised." Kamich wrote on Real Money. Sure enough, shares popped immediately after earnings, touching their highest levels since mid-September.

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In speaking with Cramer, Bergh said the new stores feature a combination of local personalization, customization and digitalization. The NextGen stores are in addition to Levi's familiar existing outlet stores.

The apparel and denim maker recently posted strong results that included an 11-cents-a-share earnings beat.

Bergh said he was very pleased with this past quarter, noting that Levi's is benefitting from both a denim replacement cycle and also internal changes that are driving the company into more premium markets that are boosting gross margins, including 57.5% this quarter.

When asked about the supply chain, Bergh said that Levi's is fortunate to have a diverse supply chain that's not beholden to any one country. He said products typically can be made in multiple countries, if needed, which gives the company flexibility. Also, given its scale, it can lock in cotton products at good prices.

Cramer said he's always on the hunt for great brands that know how to execute and Levi's is at the top of his list.

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