Levi Strauss:
As Reliable
As Its Jeans

Focuses On Expanding
Retail Footprint; Doesn't
Rule Out Acquisitions

By Richard Collings

Published: August 14, 2009

   Levi Strauss & Co., the privately held San Francisco-based denim apparel business, continues to focus on building its brands and to seek ways of expanding its retail footprint, said Jeff Beckman, director of corporate communications.

   While the company could consider opportunistic acquisitions or other means of increasing its number of retail stores, it also wouldn’t rule out buys of other brands.
   Beckman, though, emphasized that the company couldn’t predict the future as it regards acquisitions. In the past, the company had ruled out buys of other brands due to its level of debt.
   It was also previously thought that Levi Strauss could seek to go public again as one possible route of paring down debt, by converting debt into company stock.
   But Beckman responded that the denim giant has been successful at lowering its debt, while focusing on improving cash flow and shareholder value.

   The family-owned company has plenty of liquidity, Beckman said, with about $500 million in cash, cash equivalents and credit facilities.

   In July, Levi Strauss acquired 73 Levi’s and Dockers Outlets licensed to Anchor Blue Retail Group, which had gone bankrupt, for $72 million under Section 363 of the U.S. Bankruptcy Code.

   Beckman said the pace of store openings had slowed, but acknowledged that the company has had to close some stores. He said, however, the number of new stores exceeds the number of closed stores.

   Globally, the Levi’s brand is doing well despite the downturn. Due to currency fluctuation, revenues were down, but would have increased by a few percent year-over-year if the exchange rates had held steady.

   In China, the company has seen double-digit growth, but Japan remains a problematic market. Levi Strauss sells product in some 110 countries, and sources its manufacturing out to 400-to-450 contractors in some 40-to-45 countries, Beckman said.

   The company is currently focused on reinvigorating its Dockers brand, with which it has had difficulties, and is now experimenting with a new retail format so that potential customers do not simply encounter racks of Dockers, and has launched a range of different fits or styles. He said early results are promising.

   In the past, the company was focused on technical innovations and on marketing the Dockers brand as occasion wear, such as for work and weekends.

   Levi Strauss also consolidated its global premium denim business under one roof, Levi’s XX, placing its headquarters in Amsterdam, and led by fashion industry veteran Maurizio Donadi.

   Donadi was previously at Polo Ralph Lauren, where he was a senior vice president and brand manager for the RRL and Rugby brands. Other prior stints included helping to reposition the Emporio Armani division for Giorgio Armani, and playing a key role in establishing and expanding the Diesel brand in the American market in the mid-1990s.

   Levi Strauss is content with the performance of its premium brand Capital E, which continues to be made in Los Angeles, Beckman said. He declined to comment, however, on how the brand’s sales compare to other premium denim companies such at 7 For All Mankind or True Religion, as the company does not break down revenues into product categories.

   The company has also found that launching its Levi’s Signature brand, which is sold in retailers such as Wal-Mart and Target, has neither cannibalized nor is confused with its other products.

   As of its quarter ending May 31, 2009, Levi Strauss had net revenues of $904 million roughly, and a loss in net income of about $4.3 million, compared to approximately $936 million in net revenues and positive net income of close to $700,000 for the quarterly period ending May 25, 2008.

   Cash and cash equivalents, without credit facilities, was $269 million, while long-term debt was just under $1.8 billion.
   For the fiscal year ending November 30, 2008, Levi Strauss had net revenues of $4.4 billion, compared to $4.36 billion for the fiscal year ending Novemeber 25, 2007.

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