Levi Strass Opens Cutting Edge DTC Facility in Kentucky
Levi’s New E-Comm Fulfillment Center Starts Shipping in July
Levi’s long-awaited digital fulfillment center in Northern Kentucky is finally open for business.
The 575,700-square-foot automated facility in Erlanger, Ky., which cost approximately $48 million to upgrade and will create an estimated 300 jobs, is designed to bring all of Levi’s U.S. e-commerce business under its own real estate.
Chip Bergh, Levi Strauss & Co. president and CEO, confirmed the opening during the denim company’s second-quarter earnings call last week, saying orders will “begin shipping from there this month.”
The newly opened facility will complement two other distribution-related facilities in nearby Hebron, Ky., where the company employs roughly 300 people. The new facility will fulfill e-commerce for customers in the eastern U.S.
Levi’s now has 13 distribution centers worldwide, including two in Canton, Miss. and Henderson, Nevada. The Nevada facility was Levi’s first owned warehouse that fulfilled orders for e-commerce, brick-and-mortar and wholesale.
Bergh said the Kentucky facility will “drive more agility and inventory positioning, reducing lead times, improving customer satisfaction and accelerating digital margin expansion over time.”
He described Levi’s move to a “DTC-first” business as the company’s second biggest priority after the growth of its brands, coming at a time where the jeanswear firm has prioritized its direct sales and has recently seen outsize growth in that area.
DTC net revenues increased 13 percent to $621.5 million in the second quarter, driven by growth in company-operated mainline and outlet stores and e-commerce sales, which jumped 20 percent across all geographical segments.
The channel now represents 44 percent of total sales in the first half of 2023, an increase from the 38 percent of net revenues DTC brought in during the 2022 period. Conversely, the wholesale channel generated 56 percent of net revenues, down from 62 percent in the first six months of last year.
Wholesale saw net revenues decline 22 percent to $715.3 million in the second quarter. Adjusting for a shift in wholesale shipments where goods got pushed up from the second quarter to the first quarter, global wholesale net revenues were down by low-double-digits. The shift came as Levi’s implemented a new ERP system across the U.S.
Bergh described the factors behind the wholesale slowdown. Not only are macroeconomic concerns pressuring the price-sensitive consumer, but the company is also dealing with the inventory backlog that started piling up last year, he said.
“The lower fill rate resulted in higher customer out-of-stocks and less newness on the floor the last few quarters,” said Bergh.
While the new distribution center will exclusively fill direct e-commerce orders and not wholesale, it can lighten the load for the Hebron, Canton and Henderson warehouses by housing inventory from those locations, if needed.
Levi’s isn’t done expanding its global distribution network, as it is still constructing a LEED-certified distribution center in Dorsten, Germany. That facility is expected to open in 2024.
And late last year, the company got the okay to build its largest project yet, a 1.26 million-square-foot industrial building in Kentucky’s Boone County. Levi has not confirmed the project’s purpose, but it will have 66 bays, and 450 parking spaces for tractor trailers.
To encourage investment and job growth in the community, the Kentucky Economic Development Finance Authority (KEDFA) today approved Levi Strauss & Co. for up to $900,000 in tax incentives through the Kentucky Enterprise Initiative Act (KEIA). KEIA allows approved companies to recoup Kentucky sales and use tax on construction costs, building fixtures, equipment used in research and development and electronic processing.
Founded in 1853, San Francisco-based Levi Strauss & Co. is one of the world’s largest brand name apparel companies and a global leader in jeanswear. The company designs and markets jeans, casual wear and related accessories for men, women and children under the Levi’s, Dockers, Signature by Levi Strauss & Co., Denizen and Beyond Yoga brands. Its products are sold in more than 110 countries worldwide through a combination of chain retailers, department stores, online sites and a global footprint of approximately 3,000 brand-dedicated stores and shop-in-shops. Levi Strauss & Co.’s reported 2020 net revenues were $4.5 billion.
