Chip Bergh, CEO of Levi Strauss, said on Thursday that the jeans manufacturer will go shopping for more space as vacancies for commercial rentals increase.
The company in San Francisco wants to add its 40 stores and 200 outlets in the U.S. to strengthen its operations directly to the customer, the executive said.
“This is a great opportunity, especially with the tsunami that is currently taking place in the area of commercial real estate,” Bergh told Jim Cramer in a Mad Money interview. Vacancy rates at local shopping malls rose to a record 11.4% in the first quarter, from 10.5% in the fourth quarter, according to data from Moody’s Analytics.
“It gives us the opportunity to secure good leases with large leases, and we take advantage of that,” he said.
Sales directly to the consumer accounted for about 40% of Levi’s total revenue last year, the company said in February. For this year, Levi wants sales to make up 60% of total revenue.
The company calls NextGen Stores a part of the new store. It is designed to be smaller, up to 2,500 square feet, and equipped with machine leather to help stock, Bergh said.
“It offers really important opportunities and we have stated that in future we will be led by DTC,” he said. “It’s very important to us, the gross margin is attractive and we succeed.”
Levi’s direct-to-consumer strategy includes its main and outlet stores, online operations and department stores with which it collaborates. Sales in the category fell by 26% over the past quarter, resulting in less foot traffic in its stores.