Levi Strauss wants to capitalize on commercial vacancies as it expands footprint, CEO says

Levi Strauss CEO Chip Bergh said Thursday the jeans maker is shopping for more space as commercial rental vacancies are up.

The San Francisco-based company wants to add to its 40 stores and 200 outlet locations in the U.S. in order to boost its direct-to-customer operations, the executive said.

“That represents a huge opportunity especially with the, you know, the commercial real estate tsunami that is happening right now,” Bergh told CNBC’s Jim Cramer in a “Mad Money” interview. Vacancy rates at regional malls rose to a record 11.4% in the first quarter, up from 10.5% in the fourth quarter, according to data from Moody’s Analytics.

“It gives us an opportunity to secure great locations at great leases and we’re capitalizing on that,” he said.

Direct-to-consumer sales accounted for about 40% of Levi’s total revenue last year, the company said in February. For this year, Levi wants those sales to make up 60% of total revenue.

Part of its new store roll out is what the company calls NextGen Stores. These are designed to be smaller, as little as 2,500 square feet, and equipped with machine learning to help with inventory, Bergh said.

“These really do represent significant opportunities and we’ve declared we’re going to be DTC-led going forward,” he said. “It’s really critical to us, gross margin accretive and we’re successful at it.”

Levi’s direct-to-consumer strategy includes its mainline and outlet stores, online operations and department stores it partners with. Sales in the category dropped 26% last quarter, losses it blamed on less foot traffic in its stores.