Dive Brief:

• Levi Strauss & Co. is pushing back the expected completion date for its U.S. distribution network overhaul to the end of 2026, executives said on a Jan. 28 earnings call. 
• EVP and Chief Financial and Growth Officer Harmit Singh said a transition to a third-party run facility “has taken longer than we expected,” necessitating the delay. The facility is located in Groveport, Ohio, a company spokesperson confirmed to Supply Chain Dive. 
• Due to the delay, the clothing maker has continued to operate an owned center in Hebron, Kentucky, according to the spokesperson.

Dive Insight:

Levi’s plan to ramp down the parallel use of owned facilities in favor of a hybrid model that utilizes leased sites operated by third parties is hitting a snag near the finish line. The jeans maker previously said it expected to complete the shift in early 2026. 

By continuing to operate the Hebron facility to meet demand while the transition to the Groveport site continues, the company has incurred higher distribution costs, Singh said. Those increased expenses are expected to continue in the first half of 2026 after contributing to a 2.6% hike in selling, general and administrative spending in Q4, according to Singh.  

Despite the delay, the company remains confident in the strategy change and its ability to complete the transition this year, Singh said, pointing to a similar effort in Europe as a blueprint. 

“We successfully executed a distribution transition from owned and operated to a hybrid model in Europe last year, enabling us to fulfill our strong demand as evidenced by the double-digit revenue growth in the quarter while improving our profitability in the region,” Singh said. “This gives us confidence that we will successfully complete the transition in the U.S. this year.”

Meanwhile, amid the transition pain points, the company managed to trim lead times while further optimizing its product mix, both key pieces of its shift to being a more direct-to-consumer focused company, CEO and President Michelle Gass said on the Jan. 28 call. 

“We are still in the early stages of what we believe is a significant opportunity to continue to improve our DTC margins, which will be a key driver of our overall company margins,” Gass said.