Levi’s distribution network transition saga continues to drag

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Dive Brief:

• Levi Strauss & Co. won’t see benefits from its beleaguered distribution network overhaul until 2027, according to a Q3 earnings call from Oct. 7.
• Despite closing its Hebron, Kentucky, distribution center at the end of Q3, Levi’s has been slowed by complexity caused by the number of SKUs it manages and a fire at one of its distribution centers, CEO Michelle Gass said in the call.
• The fire “was a big disruption in some of our most important weeks,” Gass said, though she noted the recovery has gone smoothly. The damage to inventory was insured and the impact on financial results was not significant, the company said in a securities filing. Levi’s did not respond to an inquiry about which facility in its network was impacted by the time of publication.

Dive Insight:

Levi’s network transition from an owned distribution center approach to a hybrid third-party-run facility model has been tripped up again, but the company is optimistic about where the journey will end.

Following the closure of the Hebron site, Levi’s is focused on working through operational complexities at its Groveport, Ohio, facility, where the Kentucky location’s work was moved.

“I think 2027 is very reasonable and realistic to start seeing the benefits. And like I said, closing that Hebron facility was an important milestone to say we have the confidence that Groveport will fulfill our needs,” Gass said.

Still, this is the second time that Levi’s has had to push back its distribution network overhaul completion date. In January, the company said it would wrap up the move by the end of 2026 after it was forced to continue operations at the owned center in Hebron because the transition to Groveport was taking longer than expected.

The challenges of the continued delay have and may continue to cause shipping delays, order cancellations and increased costs, impacting Levi’s relationships with wholesale customers, according to the securities filing.

Other companies also working on distribution network changes include La-Z-Boy and AutoZone. Like Levi’s, La-Z-Boy is shrinking its footprint by reducing its total number of distribution facilities and the total mileage products travel. On the flip side, AutoZone said this year it was working on expanding its U.S. distribution center network.