Behind Levi Strauss's entry into the athleisure market with Beyond Yoga acquisition
The looks on display at Levi's stores clearly suggest that the US denim giant is interested in a more diverse range of products than simply its iconic 501 jeans and the Trucker jacket. Nevertheless, this summer’s announcement that Levi Strauss, the parent company of Levi's and Dockers, was acquiring a yoga brand, may have come as a surprise.
The denim and chinos giant wrote a cheque for some $400 million for athleisure brand Beyond Yoga, which is still being run by its co-founder Michelle Wahler.
At the publication of the group’s latest quarterly results, Chip Bergh, CEO of Levi Strauss, commented on the acquisition.
“One of the reasons [for the acquisition] was that one of our strategic mainstays is to continue to diversify the company. [Buying Beyond Yoga] puts us in the performance athletic category. In the US, on the basis of the past nine months, it is a $50 billion category, five times bigger than the total jeans category and it is also up versus pre-pandemic levels,” said Bergh.
"This puts us in a market that is much larger than the entire denim market," Bergh added. "[Beyond Yoga] is a very small brand that I think has a lot of potential in the long term. Its first objective is to be very profitable. But beyond that, what interests us are also the skills it brings to us. Our ambition is to grow our women's business to 50% of our total business. [Beyond Yoga] is clearly going to help there. But the brand does bring capabilities and skills that I think will help us beyond the mere acquisition. We will learn about fabrics and manufacturing in a more performance-oriented sector, and this can help us for the rest of our business too. That is what I hope to see happen over time.”
According to Levi Strauss's senior management, Beyond Yoga, which is very active on social media and is big on inclusivity, has the potential to generate sales worth $100 million next year while remaining profitable. Harmit Singh, the CFO of Levi Strauss, said that the brand’s operating margin is already above 12%. Now that Levi's is growing at pace and generating healthy margins, Bergh said he considered several opportunities to strengthen the group's brand portfolio.
“When we were looking at acquisitions, one of the things that really impressed us about Beyond Yoga was that it has potential,” said Bergh. He underlined that “[Beyond Yoga] is a brand that is built on a deep consumer insight around body positivity. It promotes the concept that any woman can be an athlete and can work out, and should feel good about working out and her body, regardless of her body shape. It celebrates this kind of inclusion and diversity. And when you look at the [brand’s] website, you'll see this, and it resonates with consumers. We think that what they bring to the party is this deep consumer understanding and insight. They've built a community of users. They know their consumer really well, and combine this with a deep understanding of the category and amazing product knowledge. What we bring to the party is the ability to scale a brand.”
Despite Beyond Yoga's track record of strong growth in recent years, even double-digit growth in some cases, Levi Strauss's management argued that, by joining the group, the brand’s potential will increase. “When [Beyond Yoga] made money, it reinvested it in the company's growth. In this sense, our financial contribution will also be an aid for them. What we bring to bear is first of all our deep brand-building capability. Secondly, a deep understanding of menswear, which is a clear opportunity for this brand, virgin territory for [Beyond Yoga] at the moment. Thirdly, we will be able to develop the brand’s retail capabilities, clearly another opportunity. But we will take the time to learn our way there. Finally, this is a brand that can travel internationally. Currently, almost all of its business is carried out in the USA, and mainly online.”
Beyond Yoga is now going through the integration phase. But like the sportswear giants and leading athleisure names such as Lululemon or Sweaty Betty, recently acquired by the Wolverine Worldwide group, Levi Strauss is not joining the gym just for show. After Bergh took charge of the group in 2012, the revenue of Levi Strauss increased from $4.6 billion in fiscal year 2012 to $5.8 billion in 2019, while its operating result improved from $334 million to $567 million.
Copyright © 2023 FashionNetwork.com All rights reserved.