Levi Strauss will close its owned distribution center in Hebron, Kentucky by the end of fiscal Q3 and move US volume to a Maersk facility in Groveport, Ohio.
That hands more of Levi’s US warehousing to a carrier-turned-3PL and avoids the capital of owning and automating it. Walmart and Target are making the opposite bet, building and automating their own networks.
Levi disclosed the move on its fiscal Q2 call. Net revenue rose 8% to $1.56 billion and gross margin ticked up 10 basis points to 62.7%, driven by lower product costs and pricing, not distribution improvements.
The driver: The network rebuild tracks Levi’s pivot to selling direct. Direct-to-consumer revenue rose 11% in the quarter and now makes up 51% of the total, and e-commerce grew 19%. CEO Michelle Gass has called it an evolution into a “DTC-first” company. Serving store shipments and online orders from one pool of inventory takes a different network than the wholesale model Levi ran for decades. Renting automated capacity from Maersk and GXO gets it there without owning the warehouses.
The setup: Levi has been building toward this for years. Groveport has run under Maersk for nearly two years. The 1.2-million-square-foot facility handles roughly 100 million units annually and is the 10th Levi site Maersk operates under a 25-year relationship.
GXO runs a 750,000-square-foot DC in Dorsten, Germany under a 20-year contract. Levi has completed the remap of Europe to an omnichannel network. The logic is capital avoidance: outsourcing lets it skip a planned Germany build. Maersk, which bought LF Logistics for $3.6 billion, is one of several ocean carriers moving into contract logistics, a pattern The Conveyor has tracked.
The messy middle: The transition ran about a year late and cost money along the way. Distribution expenses rose 19.5% year over year in one quarter as Levi ran Hebron and the new network in parallel, and the switch slipped from its original timeline. For a stretch, that meant paying to operate the old DC and the outsourced network at the same time.
“The transition has taken longer than planned as we balanced strong demand with the operational shift,” CFO Harmit Singh said, putting the one-time cost at “a couple of million.” Levi brought in a new chief supply chain officer to finish it. The Hebron closure cuts 303 jobs.
The capex split: The decision sits at one end of an industry split over whether to own distribution or rent it. Outsourcing turns the fixed cost of building and staffing warehouses into a variable fee paid to the 3PL. Levi is a mid-cap apparel brand, while Walmart and Target are general-merchandise giants at far larger scale, so it is not a direct comparison.
Levi: outsourcing to Maersk and GXO to avoid warehouse capex
Walmart: about $16.5 billion in FY26 supply chain and tech capex, with about 60% of US stores now served in part by automated DCs; CEO John Furner says the spend "probably peaks" over the next two years
Target: building its own automated sortation centers under a roughly $100 million program
Distribution expense improved by about 20 basis points as a share of sales in Levi’s first half. Singh said the second-half distribution expense should run “probably a half a point better” than the first. The Groveport handover is due by the start of fiscal Q4.
