In his first comments to the investment community on Levi Strauss’ acquisition of Beyond Yoga, Chip Bergh, president and CEO, Levi Strauss, cited opportunities to expand the Los Angeles, CA-based yoga brand into retail, men’s and international as well as to take advantage of growth momentum in the overall performance athletic category.
“The acquisition puts us in the fast-growing and high-margin premium activewear category with the successful and authentic brand that is rooted in body positivity, inclusivity, diversity, and quality,” said Bergh on its third-quarter conference call. “I believe the combination of their category expertise, deep consumer understanding and outstanding product with our expertise and capability and brand building, retail operations, men’s and international, are a powerful combination that makes me confident we can meaningfully, and profitably, scale this brand for the long-term.”
Levi’s announced plans to acquire Beyond Yoga on August 5. Bergh said the acquisition closed in late September. Levi’s revealed on the call that the purchase price for Beyond Yoga was approximately $400 million. The acquisition is expected to generate over $100 million in revenues next year with an EBIT margin that is accretive.
Levi officials said the brand has a strong runway for profitable double-digit growth via expanded categories, geographies and distribution. Bergh added, “I’m also very proud that the entire impressive Beyond Yoga team of roughly 80 innovators and entrepreneurs that have stayed with the business and have joined Levi Strauss & Co.”
In the Q&A session, Bergh said the acquisition would help Levi’s build on the recent success the company found in its core denim business from the accelerated casualization trend last year.
He said that in the past nine months, the U.S.’s athletic performance category amounted to a $50 billion category, five times bigger than the total jeans category. The athletic performance category is up against year-ago levels and the pre-pandemic nine-month period in 2019, he noted.
Asked by an analyst how Levi could help to grow a “more early-stage hyper-growth situation” such as Beyond Yoga, Bergh said that before joining Levi’s in 2011, he spent 28 years at Procter & Gamble “building brands, launching new brands, creating brands, turning around brands.”
He joined Levi’s, which owns Dockers, because he saw a turnaround opportunity in the core Levi’s brand. He added, “My thesis coming in was Levi’s was 85 percent of the company. And if I could turn the brand around, we could turn the company around. And that fundamentally, at the end of the day is what we’ve done.”
As the company has explored acquisitions, Bergh said Levi’s was foremost attracted to Beyond Yoga for its growth potential.
“One of the things that impressed us about Beyond Yoga is it has legs,” said Bergh. “This is a brand built on deep consumer insights around body positivity and the fact that any woman can be an athlete and can work out and should feel good about working out in her body regardless of her body shape. And that is part of the insight. So it celebrates that inclusion and that diversity. And when you look at the website, you’ll see it, and it resonates with consumers, but it is real fundamental consumer insight.”
He said Beyond Yoga has grown double-digits for the last ten years and has been profitable its entire existence. Bergh said, “They’ve managed the business the old-fashioned way. They made money; they poured it back into growing the business. And so, our capital will also be a help to them.”
He said Levi’s would bring “deep consumer understanding and insight” to support Beyond Yoga’s positioning.
“They’ve built a community of users. They know their consumer well combined with a deep understanding of the category and amazing product and great product knowledge,” said Bergh.” What we bring to the party is an ability to scale a brand and bring great brand-building capabilities to bear.
He added, “What we bring to bear is the steep brand building capability, number one. Number two, is a deep understanding of men’s, which is a clear opportunity for this brand. It’s total white space at this time. Number three is retail capabilities because retail is an opportunity. And given the structural economics of this business, it’s almost a no-brainer. But we’re not going to go out fast. We’re going to learn our way there.”
He also noted that Beyond Yoga conducts nearly all its business in the U.S., mostly online and “a little bit of a wholesale business.” Levi’s reach is expected to help expand it internationally and in wholesale channels.
Bergh said, “And so, we think all of those things together, their capabilities combined with our capabilities is what gives me confidence that we’re going to be able to drive this business, continue that double-digit growth trajectory and do it very, very profitably. And over time, it’s going to be a meaningful contributor to the business.”
Bergh noted that in the past, Levi’s had talked about acquisitions to diversify the company’s sales mix.
He said, “Our ambition is to get our women’s business to 50 percent of our total business. This is clearly going to help there. But they do bring capabilities and skills that will help us beyond just Yoga. And one of the things that we are trying to protect is this very scrappy team that has demonstrated an ability to build the business organically, again, by focusing on satisfying and meeting the consumer and delivering a great product. And a lot of what they are doing, we’re able to take some of those learnings back to our core business, and it will help us over time.”
Photo courtesy Beyond Yoga