Levi Strauss’ Sales Decline Slows in Fourth Quarter
Levi Strauss & Co. managed to slow its annual sales decline to a single-digit rate during the fiscal year ended Nov. 26, but the San Francisco-based company on Wednesday said its ongoing turnaround bid was slowed by weakening domestic demand for apparel and the strong dollar’s dulling impact on foreign sales.
Fourth-quarter net income fell to $75.4 million from $157 million in 1999, but Levi noted that 1999’s final quarter was bolstered by a substantial one-time gain. Quarterly revenue slipped to $1.29 billion from $1.4 billion a year earlier.
Levi, now in the middle of a painful reorganization, has struggled for years to stop a market share slide that generated a string of double-digit sales drops. Net income rose to $223.4 million in 2000, up from $5.4 million in 1999, a year in which profitability was hindered by expenses driven by the reorganization. Revenue slipped to $4.6 billion from $5.1 billion. By comparison, the privately held company reported $7.1 billion in revenue in 1996.
Levi, which reports financial data each quarter because its bonds are publicly traded, believes it finally has the mix of products and advertising to reach finicky teens and young adults.
“I’m very pleased with where we are,” Levi Strauss Chief Executive Philip Marineau said. “We started the year with a 13% [monthly] decline in sales and ended it with a 4% decline. We expect to stabilize the business next year, if not grow it.”
Some fashion industry observers question whether Levi Strauss is moving quickly enough in an apparel industry top-heavy with such high-end brands as Calvin Klein and a growing army of private-label brands, including JC Penney Co.’s Arizona Jeans line.
“To say ‘We’re not hemorrhaging as badly as before’ is unfortunately not enough,” said Isaac Lagnado, president of Tactical Retail Solutions, a New York-based market research firm. “Their market share against Lee and the private label jeans has shown a slight decline in the past year.”
“They’re to be congratulated for continuing to cut costs,” said Kurt Barnard, a New Jersey-based fashion and retailing industry consultant. “But while it’s fine to be cutting costs, what they need to do is show top-line growth.”
Levi traditionally hasn’t broken out monthly sales data, but Marineau said Levi’s December sales rose by 3%.
As part of its bid to revive sales, the 148-year-old company will make its Super Bowl advertising debut during CBS-TV’s Jan. 28 broadcast with a series of spots. In addition to showcasing Levi’s “Reissued 569 Jeans” line, the ads are designed to “tell our employees and others that ‘We’re back,’ ” Marineau said.
Marineau, who joined Levi in 1999 from PepsiCo, acknowledged that a lone Super Bowl commercial won’t reignite consumer demand. “The best antidote we have for a weak apparel market is great, new innovative product,” Marineau said. “We know historically that what drives success is the right styles and fit.”
