Levi Strauss & Co.

Good day, ladies and gentlemen, and welcome to the Levi Strauss and Company Third Quarter Earnings Conference call for this period ending August 29, 2021. All parties will be in a listen-only mode until the question-and-answer session, at which 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 through October 13, 2021. Please use conference ID 1570959. This conference call also is being broadcast over the Internet, and a replay of this webcast will be accessible for one quarter on the company's website at LeviStrauss.com. I would now like to turn the call over to Ida Orphan, Senior Director, Shareholder Relations and Risk Management at Levi Strauss & Company.

Thank you for joining us on the call today to discuss the results for our third fiscal quarter of 2021. Joining me on today's call are Chip Berg, President and CEO of Levi Strauss, and Harmeet Singh, our CFO. We have posted complete Q3 financial results in our earnings release on our IR section of our website, investors.levistrauss.com. The link to the webcast of today's conference call can also be found on our site, We'd like to remind everyone that we will be making forward-looking statements on this call, which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. 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 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, and we assume no obligation to update any of these statements. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in today's 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 our website shortly. Today's call is scheduled for one hour, so please limit yourself to one question at a time to give others the opportunity to have their questions addressed. And now I'd like to turn the call over to Chip.

Good afternoon, everyone, and thanks for joining us today. We delivered another strong quarter. Revenues were $1.5 billion, up 41% versus Q3 2020, and up 3% versus pre-pandemic levels of Q3 2019, with profitability at a multi-decade high, well exceeding our expectations. Our results... The continued acceleration over the past few quarters and our improved structural economics clearly underscore that the Levi brand continues to be hot, our strategies are working, and we are emerging from the pandemic stronger than ever. And all this is despite the ongoing impacts of COVID, supply chain constraints, and other macro issues, including inflationary pressures. The casualization trends that have been accelerated by the pandemic globally are here to stay, and the denim cycle we started pre-pandemic is continuing to drive growth. In the U.S., both the apparel segment and the denim category are now larger than pre-pandemic, with denim growth outpacing total apparel for the second quarter in a row. We expect these drivers will provide our business with a multi-year tailwind. The impressive bounce back we saw in our U.S. business in the second quarter accelerated into Q3, up 8% to 2019 on a reported basis. And consumer demand in Europe remained strong with the region inflecting the growth, up 7% versus 2019 as stores reopened. This despite tourism being down markedly in both the U.S. and Europe. We're excited to see consumers returning to our stores as markets reopen with company-operated brick-and-mortar revenue returning to pre-pandemic levels. Impressive results given traffic remains down versus 2019 and 10% of our doors were closed in the quarter. Importantly, despite stores reopening, revenues through digital channels were up 10% versus prior year and represented approximately 20% of total third-quarter revenues. This follows 60% growth last year. Our team is doing an outstanding job mitigating the unprecedented challenges on the supply and logistics side. Our globally diversified sourcing strategy combined with our scale are a source of competitive advantage. We long ago decided that we would not source more than 20% of our product from any one country. Our sourcing currently spans 24 countries. We did this to avoid concentrations to be less exposed to bottlenecks in production capacity, like what's going on currently with Vietnam, where our exposure is less than 4% of our global volume. We also have implemented a strategy to cross-source key products. For example, more than 50% of our current bottoms volume is approved for production of suppliers in at least two different source countries, sometimes more for men's core. A large portion of tops are also cross-sourced. Our supply chain network, including the cross-sourcing, allows us to quickly shift production. As an example, after the China tariffs were implemented, we rapidly reduced our China exposure in the U.S. from 8% to less than 1%. And more recently, as backups at West Coast ports began to intensify, we quickly redirected the vast majority of our goods to come in through East Coast ports. We're also leveraging our scale, expertise, and strong relationships with our vendors to protect our capacity and control costs. We've locked in approximately 70% of ocean volume and costs through the summer of next year. And since cotton is very much in the news, I will remind you that we have negotiated most of our product costs through the first half of 2022 at very low single digit inflation. And for the second half, we are anticipating a mid single digit increase, which we will offset with pricing actions we've already taken. Let me now shift to some key highlights from our third quarter. The Levi's brand was up 4% versus 2019, and even stronger in our top five markets, up 9%. Both our women's and men's bottoms businesses saw strong sequential acceleration. Men's bottoms returned to growth, up 7% versus 2019. Women's bottoms outperformed all categories in Q3, up 18%, driven by strong performance in high-rise and fashion fits. The trends towards looser fits continue, representing almost half of our women's and men's bottoms assortments. We're seeing increased demand for iconic products like the 501, which was up 20% versus Q3 2019. Our global wholesale channel grew 3% versus 2019, primarily driven by strong performance in the US. Our efforts to elevate the brand within US wholesale are working. Our AURs are up high single digits, underscoring our pricing power. And our premium business is up 24%, both versus 2019. In our direct-to-consumer channel, accelerated momentum in the Americas and the reopening of stores in Europe drove significant growth over prior year in both regions. More importantly, revenues from our DTC business returned to growth versus pre-pandemic 2019 levels, up 4%, driven by strength in e-commerce. Despite 10% of our doors being closed in the quarter, global brick and mortar was up 1% to 2019, with strong growth in the Americas and Europe. In the US and Europe, higher conversion and strong increases in AUR, driven by the pricing power of the Levi's brand, have offset lower store traffic. And while tourist stores have not yet recovered, our local doors are growing, demonstrating our assortments are resonating with consumers. Our next gen concept continues to show encouraging results. These smaller footprint doors are some of the most profitable in our U.S. mainline fleet, supporting our objective to increase distribution of our premium products in the U.S. marketplace. We are continuing to elevate our mainline fleet globally and are on track to open 100 new doors this year, most of which will be next gen. We also continue to enhance the omnichannel experience for our consumers. During the quarter, we introduced tailor shop virtual workshops, began piloting self-checkout, and launched a shop-the-store function on our app in the Americas. Two final quick points. First, we completed the Beyond Yoga acquisition in late September. The acquisition puts us in the fast-growing and high-margin premium activewear category with a successful and authentic brand that is rooted in body positivity, inclusivity, diversity, and quality. I believe the combination of their category expertise, deep consumer understanding, and outstanding product, with our expertise and capability in brand building, retail operations, men's, and international, is a powerful combination that makes me confident we can meaningfully and profitably scale this brand for the long term. I'm also very proud that the entire impressive Beyond Yoga team of roughly 80 innovators and entrepreneurs have stayed with the business and have joined LS&Co. Finally, we recently released our first standalone sustainability report, I invite you all to read the 200 plus page report in full, but I want to flag two pieces of it here. First, we are centering our ESG efforts on three main pillars, climate, consumption, and community. Second, a key objective of our report is to hold ourselves publicly accountable and to challenge ourselves to be even more ambitious in our efforts. We plan an annual reporting cadence going forward. Now, over to Harmeet to share the details of the quarter. Harmeet?