Michael Garganese

Levi Strauss & Co.’s finance chief is ramping up the jeans maker’s capital spending, aiming to spend two-thirds of it on digital initiatives to aid the company’s recovery from the effects of the coronavirus pandemic.

San Francisco-based Levi’s this year plans to allocate about $210 million toward capital expenditures, up from last year’s budget, which was trimmed to around $130 million, according to Chief Financial Officer Harmit Singh. “We are reallocating our costs in a way that we drive synergies and savings, and invest in areas of growth,” Mr. Singh said.

Levi’s on Thursday reported net revenue of $1.31 billion for the quarter ended Feb. 28, down 13% compared with the prior-year quarter, before the pandemic hit Europe and the U.S. Digital revenue made up 26%, or about $340 million of net revenue in the quarter, up from about 16% during the prior-year period.

The company expects sales to grow as increasing supplies of Covid-19 vaccines and fresh stimulus funds boost the economic recovery. Levi’s forecasts net revenue will increase by 24% to 25% during the first half of the year, compared with the first half of fiscal 2020 when it booked $2 billion in net revenue. The guidance is “largely driven by a faster recovery and a more optimistic view that we have,” Mr. Singh said.

Levi’s, which temporarily closed many of its stores because of local lockdown restrictions in 2020, has been shifting toward e-commerce sales and expanded its online presence, by offering virtual styling and shopping services, for example. Some of the about 1,540 locations the company owns and operates—consisting of stores as well as shop-in-shops—are currently shut amid the resurgence of coronavirus infections, particularly in Europe. Still, it plans to open 81 new stores in 2021.

The company is looking to expand its digital offerings and increase its use of data analytics and artificial intelligence to forecast consumer demand and set the right prices, Mr. Singh said. “As we decide about pricing and promotions, it tells us how deep you can go,” Mr. Singh said about the company’s AI tool.

The digital initiatives include spending for Levi’s smartphone app, customer loyalty programs and expanding its “buy online, pick up in store” offering in Europe and Asia, he said.

Levi’s also wants to build out its distribution for e-commerce orders, which is largely run by third-party providers. “What this gives you is insight into inventory,” Mr. Singh said, adding that better insight into Levi’s stock helps drive efficiencies.

Levi’s last year reduced its costs, in part by cutting about 700 jobs in the U.S. It reported selling, general and administrative expenses of $583 million for the quarter ended Feb. 28, down 12% compared with the same period last year.

CFO Pay Rises as Their Companies Navigate Coronavirus Pandemic April 15, 2021
The company continues to “play offense” from an investment standpoint while reducing SG&A expense in other areas, analysts at investment firm Guggenheim Securities LLC said in a note to clients.

Levi’s will use some funds for the launch of its new enterprise-resource-management system, which ties together information on finance, inventory management, supply chains and human-resource management. “We started in Mexico and are now rolling it out to Canada and the U.S.,” Mr. Singh said.

The recent trend toward more casual clothing—which Levi’s promoted during the pandemic months—won’t reverse with more people returning to their offices, Mr. Singh said.

“We think underlying brand strength, new distribution opportunities and an accelerated shift to more comfortable apparel will allow [Levi’s] to exit the pandemic better positioned than peers,” Lorraine Hutchinson, a research analyst at Bank of America Corp., said in a note to clients.

Write to Nina Trentmann at Nina.Trentmann@wsj.com.

This announcement left a huge impression at the NRF Retail’s Big Show 2018: In the US, e-commerce sales are expected to overtake in-store sales by 2024. This shift in paradigm is one retailers will have to adapt to. Given this context, how can we rethink the relationship between physical points of sale and online platforms? Your questions answered.

NRF Retail’s Big Show 2018: what are the latest trends in the sector?

From 14 to 16 January, the 2018 edition of Retail’s Big Show, organized by the National Retail Federation (NRF), was held in New York. A major event for retail professionals who are on the lookout for the latest trends in the sector.

During the conference “Leading with positivity” led by WD Partners, an expert in customer experience, one announcement particularly caught our attention: in the US by 2024, e-commerce will have overtaken physical sales. With the omnichannel retailing model gaining ground, companies must rethink the role of their physical points of sale in order to stay competitive.

In the face of store closures recorded in the US in 2017, this is an even more startling observation for retailers. According to WD Partners, more than 8,000 stores have closed their doors this year alone: a first since 2000, which is not expected to improve. The firm estimates that 25% of American malls will shut down over the next 5 years.

Is this the end of physical points of sale?

By 2024, the turnover generated by e-commerce is expected to grow exponentially, to the detriment of retail. In fact, according to WD Partners’ forecast, the curve for physical sales and e-commerce will cross paths at 600 million dollars. This distribution is very different from the one in 2017: 900 million for retail and 100 million for e-commerce.

However, can we affirm that the bell has tolled for physical points of sale? Not necessarily. Studies show that a retailer who opens a store in a given location will see online traffic from residents in the area to its e-commerce platform increase by 52%. And this only 6 weeks after store opening.

A lot of the store owners often require the services of reliable online loan providing companies who help them to afford all the high-cost necessary expenses when opening a new store in a certain location. The main goal of the loan providing companies is to connect people with trustful and legit lenders offering cash advances passing the fastest and easiest process. This way, the store owners get the fastest loan for their emergency needs. The companies provide the most secured loan application protecting the information with secure encryption technology.

Within this context, eradicating physical points of sale seems doubtful. What remains to be determined however is how to rethink the relationship between e-commerce and retail in order to make the most of each sales channel.

Redefining roles between retail and e-commerce becomes a must

Despite the rise of online shopping, stores still have a non-negligible competitive edge: they are a direct point of contact with the brand and allow customers to see the products in person. However, stores can no longer be thought of as places for storage and sale but rather as a genuine marketing tool.

Welcome to the era of showrooming, the practice of using the physical point of sale as a place to present a brand’s product range. Goal: allow customers to see and find products they like in store while giving them the possibility to purchase them later online.

This practice is still not very widespread but is expected to gain ground by 2020 to limit losses. Within this context, stores will no longer seek profitability but will rather aim to give their consumers a rich and unique customer experience. This drastic shift in paradigm is one that companies must be prepared for so they can become the perfect standard-bearer for their brand.

Showrooming: what are the consequences in terms of organization?

In specific terms, showrooming entails designing a new store model. For example, flagship stores are a new type of store that act as real display cases for the brand’s products and values. This drastic transformation means less inventory in store and thus greater customer demand to purchase products.
This is precisely the strategy used by Adidas in New York. In its store, it has only a single pair of shoes available in order to redirect customers to its online platform. The brand has thus gone from a transactional approach to a model that values customer in-store experience and the feeling of exclusivity.

The consequences of such a transformation are multiple in terms of human resources and organization of space:

-The company needs to put most of its employees in charge of customer relations and reduce its labor force in maintenance areas.
-Former shop assistants will become real advisers capable of offering customers a personalized experience in line with the brand’s universe.
-Fixed cash registers will be gradually eradicated. Instead, purchases will be made on mobile phones within a context of store-to-web.

These trends observed in the American market are proof of the coming shifts in the retail sector. The challenge for companies will be to undergo this transformation in its entirety in order to benefit from the future predominance of online sales. Going from web-to-store to store-to-web is also essential for the survival of stores in the United States as well as the world around.

As the COVID-19 pandemic reshapes our world, more consumers have begun shopping online in greater numbers and frequency. According to new data from IBM’s U.S. Retail Index, the pandemic has accelerated the shift away from physical stores to digital shopping by roughly five years. Department stores, as a result, are seeing significant declines. In the first quarter of 2020, department store sales and those from other “non-essential” retailers declined by 25%. This grew to a 75% decline in the second quarter.

The report indicates that department stores are expected to decline by over 60% for the full year. Meanwhile, e-commerce is projected to grow by nearly 20% in 2020.

The pandemic has also helped refine which categories of goods consumers feel are essential, the study found. Clothing, for example, declined in importance as more consumers began working and schooling from home, as well as social distancing under government lockdowns. However, other categories, including groceries, alcohol and home improvement materials, accelerated, by 12%, 16% and 14%, respectively.

The report suggests that department store retailers will need to more quickly pivot to omnichannel fulfillment capabilities in order to remain competitive in the new environment. Specifically, they will need to drive traffic to their stores through services like buy online and pickup in store (BOPIS), and will need to offer an expanded set of ship-from-store services.

Large retailers like Walmart and Target have embraced omnichannel fulfillment to their advantage. Both reported stellar earnings this month thanks to their earlier investments in e-commerce. In Walmart’s case, the pandemic helped drive e-commerce sales up 97% in its last quarter. Target set a sales record as its same-day fulfillment services grew 273% in the quarter. Both retailers have also invested in online grocery, with Walmart today offering grocery pickup and delivery services, the latter through partners. Target has also just now rolled out grocery pickup and runs delivery through Shipt.

Amazon, naturally, has also benefited from the shift to digital with its recent record quarterly profit and 40% sales growth.

The growth in e-commerce due to the pandemic has set a high bar for what’s now considered baseline growth. According to the Q2 2020 report from the U.S. Census Bureau, U.S. retail e-commerce reached $211.5 billion, up 31.8% from the first quarter, and 44.5% year-over-year. E-commerce also accounted for 16.1% of total retail sales in Q2, up from 11.8% in the first quarter of 2020.

The questions that IBM’s report aims to answer is how much of this pandemic-fueled online spending is a temporary shift and to what extent is it impacting longer-term forecasts? The answer, at least in this estimate, is that this pandemic pushed the industry ahead by around five years. The shift away from physical stores was already underway, but we’ve now jumped ahead in time as to where we would be if a health crisis had not occurred.

This is a similar trend to what other industries have seen as well, including things like streaming/cord cutting, gaming and social video apps, and more.

Correction: The US Census Bureau figures indicate growth of 31.8% on a quarterly, not annual, basis. This figure was corrected after publication. TC apologizes for the error.

JCPenney made sure it ended 2020 with a thud, capping off an ugly year for one of the most iconic names in retailing.

With the announcement on Wednesday that current CEO Jill Soltau’s last day would be the next day, Dec. 31, the search begins for her replacement. Under new ownership — split among two giant real estate operators — as well as its branding partner and assorted private equity investors, Penney is just emerging from its bankruptcy with a clean balance sheet, about a hundred fewer stores and soon, a new leader. What it still doesn’t have yet in the eyes of many is a reason to exist.

Soltau took over the corner office at Penney a little over two years ago and assembled a new team at the retailer in an attempt to halt its precipitous retail slide and find a new identity that would provide for a place in the increasingly squeezed mid-market sector. Some criticized her lack of a sense of urgency and the visible changes at the company under her reign were marginal. Stores and signage were cleaned up, some new brands brought in and both home and e-commerce — once mainstays at the retailer — were both given more emphasis. A so-called “lab” store outside Dallas was opened about a year ago and it pointed to a possible new direction that might succeed. But any sort of a dramatic reinvent was nowhere to be seen.

Then the pandemic hit and Penney’s tenuous finances and over-reliance on physical stores doomed it to chapter 11, where it landed up in May. New ownership — it resembles Ghidorah, the three-headed monster of Japanese science fiction movies with its many faces — divvied up the proceeds and then on Wednesday dropped the CEO shoe. And while Soltau’s departure is not entirely shocking it is at least a little surprising given that she seemed to be part of the new ownership’s plans going forward. Now whoever gets her job has to start from scratch.

So who’s in line for this job in 2021…not to mention who wants to take it? Certainly with the number of retail closings in the past 12 to 18 months there is no shortage of competent and qualified retail leaders who could step into the Penney position. Who is asked will say a lot about how the retailer’s ownership group views its investment: something to blow up and totally reinvent, a legacy property to be maintained at the status quo to keep its doors open, or something in between with just enough upgrades to prolong its existence.

But a short list would have to include at least some of the following: Roger Farah, now chairman of Tiffany, but perhaps about to be out of a job with that company’s sale to LVMH; Jane Elfers, now running Children’s Place with a very nice turnaround under her belt; John Foran, former head of Walmart’s U.S. division and now running a New Zealand airline but perhaps itching to get back into retailing: Helena Foulkes, who most recently ran Saks Fifth Avenue but was caught in one of Richard Baker’s endless purges; Mindy Grossman, now running WW, formerly Weight Watchers, who has a good mid-price retail pedigree; and any number of retail retirees from Macy’s Terry Lundgren to Qurate’s Mike George to Jeff Wilke, essentially the number two at Amazon.

Of course, the ownership group could go rogue and bring in a younger hot-shot from elsewhere in retailing, particularly e-commerce, if it wants to do something dramatic. Then again, the last time Penney did this with Apple’s Ron Johnson it didn’t work out so well.

Whoever gets the job will face a staggering task: making Penney relevant in a shrinking mid-market segment, squeezed from below by Walmart, Target and the off-pricers and with an ever-desperate Macy’s at the other end of the mall facing a similar challenge and perhaps somewhat better positioned to deal with it.

It will need to get its e-commerce side up to speed, fix 600 or so physical stores that have been severely under-invested in even as the malls they are often located in are dying slow deaths, find a compelling promotional strategy that doesn’t involve endless one-day sales and coupons up the wazoo and generally remake a 119-year-old company that has been stubbornly resistant to change from both within and without.

If it sounds like your kind of job, Stanley Shashoua, now the chief investment officer of Simon Property — one of Penney’s new owners — is the interim CEO. I’m sure he’d love to hear from you…or at least some of you.