Activist company

Levi Strauss CEO says the company’s search for a new leader has received help from an unlikely source

As Levi Strauss & Co. sought his next leader, he got help from a surprising source.

Levi CEO Chip Bergh says pressure from activist investors has sparked Kohls CEO Michelle Gass to consider the job. On Tuesday, Levi announced that Gass would join the company in January as chairman and become chief executive within 18 months.

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“She’s been through wars,” Bergh told CNBC. “That’s one of the reasons we called her – and she wasn’t looking. I think the campaigners’ situation, the fact that they sent another letter between mid-September and the end of September kind of created the conditions for her to take a phone call.”

Gass will succeed Bergh, who has served as CEO since 2011. She declined to comment through representatives for Levi and Kohl.

Levi Strauss & Co. CEO Chip Bergh speaks at the CNBC Evolve conference November 19 in Los Angeles.

Jesse Grant | CNBC

Gass led a beleaguered Kohl’s, which fended off repeated attempts by activist investors to oust her. The retailer’s board of directors reached an agreement last April with a group of investors by appointing three new directors, including the former Burlington Stores CEO Tom Kingsbury.

On Tuesday, Kohl’s named Kingsbury its interim CEO.

Shares of Levi closed Tuesday at $14.86, down about 3%. Shares of Kohl’s ended the day at $28.82, up about 7%.

By the numbers: Levi Strauss and Kohl’s

Levi Strauss

  • 16,600 employees
  • 1,043 stores
  • Sales in fiscal year 2021: $5.76 billion

Kohls

  • 99,000 employees
  • 1,166 stores
  • Sales in fiscal year 2021: $19.43 billion

Source: Company filings, FactSet

In his role at Levi, Gass will lead the iconic denim brand as it strives to sell more apparel directly to consumers through its own stores and website. About 36% of total sales came from direct sales during the retailer’s last fiscal year ended last November. By 2027, Levi said it aims to expand its direct selling business to 55% of total sales.

Levi is also going beyond its signature jeans to sell more tops and activewear. It acquired clothing brand Beyond Yoga last year and plans to nearly double tops revenue by 2027. It has benefited from a shift to more casual wear due to the pandemic and a new cycle fashion that favors looser denim over skinny jeans.

Bergh said Gass was ready for the role because of her more than two decades of retail experience. He said he’s known her for about a decade and watched her build brands, launch new initiatives and lead a retailer through the challenges of the pandemic.

Led by Gass, Kohl’s attempted to gain more customers and put a modern spin on the department store chain. It added Amazon returns to stores, expanded its online business and opened hundreds of Sephora beauty boutiques in its department stores. He’s also expanded his assortment in athleisure — an experience that could help after Levi’s acquisition of Beyond Yoga.

Some Kohl investors wonder if those investments paid off. The retailer cut its full-year forecast in August, citing weaker demand as consumers are squeezed by inflation. On Tuesday, he shared preliminary third-quarter results. The company expects comparable sales to be down 6.9% in the three months ended October 29 compared to the prior year period.

Bergh, however, said Kohl’s changes had a direct impact on Levi’s sales. At Kohl’s stores with a Sephora, he said his sales grew “at a faster rate.”

This holiday season, Kohl’s had 600 Sephora stores inside its stores. It plans to add these stores to all of its more than 1,100 locations.

“We’re already starting to see the impact of Sephora stores on our women’s business at Kohl’s,” he said. “It definitely attracts a new customer there.”