Levi Strauss & Co.

Good day, ladies and gentlemen, and welcome to the Levi Strauss & Co. Third Quarter Earnings Conference Call for the period ending August 23, 2020. All parties are in a listen-only mode until the question and answer session. And at that time, instructions will follow. This conference is being recorded and may not be reproduced in whole or in part without written permission from the company. A telephone replay will be available two hours after the completion of this call today through October 13, 2020. Please use conference ID number 7768738. This conference call is also being broadcast over the internet, and a replay of the webcast will be accessible for one quarter on the company's website, levastraus.com. I would now like to hand the conference over to Ida Orson, Senior Director, Shareholder Relations and Risk Management at Levi Strauss & Co.

Thank you for joining us on the call today to discuss the results for our third fiscal quarter of 2020. Joining me on today's call are Chit Berg, President and CEO of Levi Strauss, and Harmeet Singh, our Executive Vice President and CFO. We have posted complete Q3 financial results in our earnings release on the IR section of our website, investors.levistraus.com. The link to the webcast of today's conference call can also be found on our site. We would like to remind everyone that we will be making forward-looking statements on this call, which involve risks and uncertainties, including risks and uncertainties as a result of the COVID-19 pandemic. There is significant uncertainty about the duration and extent of the impact of this pandemic. The dynamic nature of these circumstances mean that what is said on this call could change materially at any time and that actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please review our filings with the SEC, in particular the risk factor section of the quarterly report on Form 10-Q that we filed today, for a discussion of the factors that could cause our results to differ. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements except as required by law. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the earnings release on our IR website. These non-GAAP measures are not intended to be a substitute for our GAAP results, Finally, this call in its entirety is being webcast on our IR website, and a replay of this call will be available on the website shortly. And now I'd like to turn over the call to Chip.

Thanks, everyone, for joining us today. Our third quarter results were substantially better than we expected, demonstrating the strength of our brand, the power of our diversified business model, and the resilience of our teams around the world. Our brand is the strongest it's ever been, and as the lockdowns lift, we're seeing consumers coming into stores on a mission. Levi's remains the clear number one brand in the denim category and has grown market share during this period, driven by our success in women's. Levi's status as an iconic lifestyle brand also positions us to benefit from the casualization trends that have been accelerated by the pandemic. Through it all, our values have guided our actions, reinforcing that how a company gets through a crisis is just as important as getting through it. Although the pandemic is changing the apparel industry, our results reinforce my confidence and optimism about our future. We are transforming our business by focusing on the areas that will drive our success, including first, elevating our brand through product innovation, deepening our connection with our consumers, and leaning into our values. Second, accelerating the digitization of our business, including leveraging our use of data and analytics and accelerating the rollout of omni-channel capabilities. And third, diversification across geographies, product categories, and distribution channels, with an increased focus on direct-to-consumer. Beginning with elevating our brand. During this pandemic, we've held our share leadership in men's, and we've grown share in women's in Europe and China, In the U.S., we grew our total apparel share in digital and also gained share in key accounts as we outperformed competition. We continue to launch collaborations that drive energy and buzz for the brand. Just last week for Fashion Week, the surprise Levi's by Valentino collaboration was unveiled on the runway in Milan, featuring an updated version of our 517 bootcut jean that we originally released in 1969. And as people seek out more casual comfort, we're defining and leading trends with the launch of new, looser, more relaxed silhouettes across bottoms and tops, including our women's non-graphic tees, which grew in Europe, driven by our soft and comfortable perfect tees and baby tees. At Levi's, we've always believed that making a difference in the world is also good for business. We have a strong track record and take our responsibility to the environment very seriously. Our fall campaign is focused on sustainability and features our newly launched collection featuring cottonized hemp, a leading fabric innovation that saves a substantial amount of water and uses fewer pesticides than cotton. And just yesterday in the U.S., we launched Levi's Second Hand, a first-of-its-kind buyback and re-commerce program, which creates a marketplace that will allow consumers to purchase previously loved Levi's directly from us, as well as turn in worn jeans and jackets in store for credit towards future purchase. We develop secondhand with Gen Z in mind as they search for uniqueness and character in their clothing to assert their individuality. More than half of Gen Z shops in the secondary market, and they're looking for the real thing. As one of the most sought-after brands in the secondhand space, we're excited to engage with all our consumers post-purchase and capture demand for previously owned Levi's. We also recently partnered with GANI for our first ever rental-only capsule centered on circular design, which is available in both the United States and the U.K., and which was inspired by Levi's vintage archives. And we just launched our new sustainable puffer jacket made from recycled plastic bottles and waste, Not only do these jackets look and feel great, you can now warm up while keeping landfill and energy usage down. Beyond our efforts in e-commerce and sustainable fashion, we continue to drive real progress on issues such as climate and water, which is both good for business and what our consumers will be looking for going forward. We've also been outspoken about the need to address structural racism and its intersection with other issues such as gun violence prevention and voter access. We've teamed up with Rock the Vote to make sure consumers are vote ready and have turned over our Instagram platform to activists and nonprofit leaders to share how they're helping to get the vote out this fall. We partnered with Hailey Beaver and filmmaker Ogi Edonu to create a powerful PSA and portrait series with key activists and celebrities spotlighting the importance of voter education and participation. This video has generated 2.8 billion impressions with $43 million in media value. These efforts build on our leadership of the Time to Vote movement, which now includes more than 1,300 companies who have pledged that their collective 10 million-plus employees will have time to cast their vote in this year's election. And we're laser focused on our own commitments to become a more diverse company as well, carrying out the commitments first announced when we released our diversity data in June. Our second area of focus is accelerating our digital transformation. We're seeing tremendous momentum in digital selling. Our full digital sales footprint grew more than 50% in the quarter and comprised nearly a quarter of total company revenues. We've upgraded our e-commerce sites in Canada, Europe, and the U.S. They're faster and feature improved navigation and search functionalities, allowing consumers to quickly find products, and the streamlined cart and checkout capabilities are driving increased conversions. We're also revolutionizing the way consumers can connect with the brand and shop with Levi's on other digital platforms. For example, we re-envisioned the back-to-school season with a more digital approach with Gen Z in mind. We teamed up with Kohl's to create a unique virtual closet experience on Snapchat, enabling consumers to browse an edited assortment of denim, truckers, and tees, and then virtually mix-and-match options to create new looks.