Levi's CEO: Our business was very challenged this year

As the word 'recession' dominates the mind of consumers, retailers are fighting against the current to navigate cost-cutting. Denim-giant Levi Strauss (LEVI) is among them, and despite a hike in prices, the brand wasn't able to escape the rising cost in goods.

Levi Strauss & Co. CEO Chip Bergh told Yahoo Finance Live, "We knew coming into this year that we were going to be navigating a very challenging year," adding that the U.S. market posed some of the "greatest challenges" for the brand. "In the first quarter, our U.S. wholesale business was very challenged," he says.

Bergh explains that lower income consumers are making "very tough trade-offs with their monthly budgets," but reiterates that their core consumer base with higher budgets remains well intact.

Yahoo Finance Executive Editor Brian Sozzi spoke to Chip Bergh about the impact of the economic slowdown, and focus on its top business at this year's Milken Conference.

Key Video Moments:

00:00:06 - We expected a "very challenging year"

00:01:01 - U.S. seeing "greatest challenges"

00:01:18 - Low income consumers making "very tough trade-offs"

Video Transcript

BRIAN SOZZI: What are you seeing in terms of demand for your jeans right now, given things have slowed down?

CHIP BERGH: Yeah. So we knew coming into this year that we were going to be navigating a very challenging year, in part because last year was very bifurcated. We had a very strong first half as we were coming out of the pandemic. We grew 20-plus percent in the first half. And then in the summer, kind of the bottom fell out as inflation started to impact the consumer, fear of recession started to grab hold, currency headwinds. And the second half, we were basically flat. We were flattish.

So we have a huge base period in the first half and a soft base period in the second half. And this year, guess what. It's going to be the opposite. The first half is going to be really, really challenging. And we should see some real progress with some tailwinds in the second half. But as I look at the consumer around the world, there is-- first of all, the US market is where we are seeing the greatest challenges.

In the first quarter, our US wholesale business was very challenged. We have two value brands that we sell in the key mass retailers in this country. Those businesses are both off double digits. But the lower income, low to moderate income consumer, they are now making very tough trade offs with their monthly budget. And they are literally to the point where they're making decisions about, do I really need another pair of jeans?