Levi Strauss wants to capitalize on commercial vacancies as he expands his footprint, says CEO

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Levi Strauss CEO Chip Bergh said on Thursday the jeans maker was looking for more space as commercial rentals were on the rise.

The San Francisco-based company wants to add to its 40 stores and 200 outlets in the United States to strengthen its direct operations with customers, the executive said.

“This represents a huge opportunity, especially with the commercial real estate tsunami that’s happening right now,” Bergh told TBEN’s Jim Cramer in a “Mad Money” interview. Vacancy rates in regional shopping centers hit a record high of 11.4% in the first quarter, compared to 10.5% in the fourth quarter, according to data from Moody’s Analytics.

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“It gives us the ability to find great locations at great leases and we’re capitalizing on that,” he said.

Direct-to-consumer sales accounted for around 40% of Levi’s total revenue last year, the company said in February. For this year, Levi wants those sales to represent 60% of total revenue.

Part of the rollout of its new store is what the company calls NextGen stores. These are designed to be smaller, as little as 2,500 square feet, and equipped with machine learning to help with inventory, Bergh said.

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“These really represent significant opportunities and we have stated that we will be led by DTC in the future,” he said. “This is really essential for us, the gross margin is accretive and we are succeeding.”

Levi’s direct-to-consumer sales strategy includes its department stores and outlet stores, online operations, and department stores that it partners with. Sales for the category fell 26% in the last quarter, losses attributed to reduced foot traffic in its stores.

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