Levi Strauss Buying Beyond Yoga

The jeans giant is taking on the athleisure market with Chip Bergh’s first acquisition as CEO.

Levi Strauss & Co. is going beyond denim.

The jeans giant is buying Beyond Yoga, jumping into the premium athleisure market with a quickly growing brand based on body inclusivity.

This is a really big day for us,” Chip Bergh, chief executive officer, told WWD, unpacking the company’s first acquisition of an outside brand during his 10 years at the helm.

The Los Angeles-based Beyond Yoga — which was founded in 2005 and makes athleisure wear in sizes from XXS to 4X — brings a new aesthetic and approach to Levi’s, but fits squarely into the company’s casual sweet spot.

“One of our key strategies is to diversify the business and this casualization trend has definitely been accelerated because of the pandemic — and not just here in the U.S., on a global basis,” Bergh said. “This further positions us as a company, with a new brand in a new space.”

While athleisure is a trend that has been championed and developed by a number of larger brands, especially Lululemon and Athleta, Bergh described the space as “where the puck is headed” in fashion.

The deal, he said, “puts us into the activewear segment in a really credible way, much faster than if we were going to try to do it on our own from scratch.”

Levi’s has talked about bringing in an outside brand in a low-key kind of way for years and Bergh described an “extremely disciplined” approach that demanded a deal that would have a strong strategic rationale, a compelling business case and a good cultural fit.

“Beyond Yoga ticks all the boxes,” he said.

The cash deal is expected to close in the fourth quarter. While the price wasn’t disclosed, Levi’s did pull back the curtain on Beyond Yoga’s financials a little.

The brand is expected to add more than $100 million in sales to Levi’s next year and be “immediately accretive to gross margins.” Beyond Yoga more than doubled its revenues over the past three years while also boosting its profitability.

Seventy-seven percent of the brand’s sales are done through the web — the company’s own site and through wholesale partners — and it has no stores.

Retail is an opportunity Levi’s can help Beyond Yoga jump into with both feet.

Cofounder Michelle Wahler, who will continue to lead Beyond Yoga as CEO and report to Bergh, is looking forward to a Levi’s boost.

“We know they’re going to be able to help us,” Wahler said. “They have intellectual capital. They’ll have capital. They’ll have the ability to help us expand into different markets. They’re going to help us with the expansion [into] men’s.”

Athleisure might be a crowded market, but clearly Beyond Yoga is going to be a brand to watch even more closely.

“It’s a competitive space, but we have always been very heads down and focused and we’re authentic and values-led and I think that really resonates with the customer,” Wahler said.

Jodi Guber Brufsky, founder and chief creative officer, added in a statement: “I have always had one goal: to make women feel good in their bodies. Beyond Yoga was created with this mission in mind, and it has served as the touchstone of the company. It was important to me that when the time came, the company would move into the hands of someone whose values matched ours. We are so excited about this partnership and look forward to a successful future.”

Harmit Singh, Levi’s chief financial officer, said Beyond Yoga was going to operate as an independent division, a setup the company is going to use for its Dockers brand as well.

“They’re empowered to run this the way they’ve run [it],” Singh said. “I think that sets up a great business model for us as a company.”

Having Beyond Yoga onboard will also bring some additional outside energy into Levi’s. As Singh said, “innovation and entrepreneurship — bring it.”

The top fashion companies have generally sought to make an opportunity out of the pandemic’s many disruptions, trimming and reworking operations, selling off side businesses and doubling down on digital capabilities.

At Levi’s, Bergh’s efforts to power through — and eventually out — of the pandemic with a stronger company seem to be driving results.

The denim maker’s second-quarter profits of $65 million showed a massive bounce back from the lockdown losses of $364 million a year earlier. Sales increased 156 percent to $1.3 billion. The rebound is helped by a consumer recovery and market trends that the CEO sees as meshing well with the company’s casual comfort zone.

With Thursday’s surprise deal, Levi’s is joining a growing number of companies that are taking their pandemic evolution a step further by bringing in a new business.

VF Corp. kicked the buying spree off last year, acquiring streetwear leader Supreme in a $2.1 billion-plus deal. But the trend has been heating up lately. Just this week, Wolverine World Wide agreed to buy Sweaty Betty for $410 million and Foot Locker Inc. cut two deals, agreeing to spend $1.1 billion to buy sneakerhead mainstay Atmos in Japan and the WSS chain targeting the Latine market in the U.S.

The flurry of acquisitions accompanies a rush of initial public offerings on Wall Street — including the pending introductions of Authentic Brands Group, Rent the Runway, Warby Parker and more.

Set that against the spate of bankruptcies last year that saw J.C. Penney Co. Inc., J. Crew Inc., Neiman Marcus Group, Brooks Brothers and others succumb to their creditors, and it’s clear the fashion industry is in the midst of a major reinvention.

And that is its own kind of disruption — another opportunity that Bergh and Levi’s are going for, with the help of Beyond Yoga.