LEVI STRAUSS & CO.

  • Overview

Longtime apparel maker Levi Strauss & Co. (LS&CO.) has jeans in its genes. A global manufacturer of brand-name clothing, LS&CO. sells jeans and sportswear under the Levi's, Dockers, Signature by Levi Strauss, and Denizen labels in more than 110 countries. It also markets men's and women's underwear and loungewear. Levi's Red Tag jeans, department store staples and once the uniform of American youth, have expanded outside their niche to markets beyond the US. LS&CO. has further transformed its products portfolio to include wrinkle-free and stain-resistant fabrics used in making some of its Levi's and Dockers slacks. The Haas family (descendants of founder Levi Strauss) controls LS&CO.

Geographic Reach

Iconic LS&CO. sells its products in more than 110 countries. It operates manufacturing, distribution, and finishing facilities in the Americas, Europe, and Asia/Pacific regions.

Operations

LS&CO.'s operations are divided among three geographic regions: the Americas, Europe, and Asia/Pacific.

The Americas contributes some 60% of its revenue. LS&CO. distributes its Levi’s and Dockers products through more than 510 company-operated stores located in 32 countries, including the US, and through the online stores it operates. The company distributes its Levi’s and Dockers products nationwide through chain retailers and department stores; outside the US, it distributes products primarily to department stores, specialty retailers, and nearly 1,800 franchised and other brand-dedicated stores. Company-operated and online stores generated about 21% of 2012 revenues as compared to 18% during the same period in 2011. In addition, company distributes Levi’s and Dockers products through online stores operated by key wholesale customers and other third parties.

The company's Europe and Asia/Pacific businesses collectively contributed about 40% of revenues. Sales of Levi’s brand products generated about 84% of 2012 sales. Pants represented about 86% of units sold in 2012 and men's products generated 75% of sales.

Sales and Marketing

A multi-channel marketer, LS&CO. sells its products in more than 50,000 retail locations in 110-plus countries. Its brands lend themselves to a variety of retail formats, including chain retailers (JCPenney, Kohl's, Wal-Mart, and Target), department stores (Macy's, Nordstrom, and Barney's), and company-operated e-commerce sites and online stores of other retailers.

Sales to its top 10 wholesale customers have accounted for approximately 32%, 30%, and 33% of revenues in fiscal years 2012, 2011, and 2010, respectively.

In 2012, LS&CO. logged $260.4 million in advertising and promotion expenses.

Directly or through third parties, LS&CO. designs, markets, and sells jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear, and related accessories for men, women, and children. Its global brands portfolio includes Levi’s, Dockers, Signature by Levi Strauss & Co., and Denizen. The company distributes its items through chain and department stores, brand-dedicated franchise stores, its own company-operated retail network, multi-brand specialty stores, mass channel retailers, and both company-operated and retailer websites.

Financial Performance

In fiscal 2012 (ends November) LS&CO. revenues slipped 3% as compared to 2011, and were down slightly on a constant-currency basis. Increased revenues from its company-operated retail network in the Americas and Europe were offset by lower revenues resulting from strategic choices in areas of its business and the slowing economic conditions in the Asia/Pacific region, particularly in India. 

Levi's brand products accounted for about 84% of sales, approximately half of which were generated in Americas region. Dockers brand products accounted for 12%. While the majority of these sales were in the Americas region, Dockers products are sold in more than 50 countries. Products for both the Signature by Levi Strauss & Co. and Denizen brands accounted for 4% of 2012 sales.

LS&CO. attributes the revenue loss to continued competition. Some of its primary competitors include vertically-integrated specialty stores operated by such companies as The Gap and Inditex; jeanswear marketed by VF Corporation, Haggar, adidas, and Nike; and private labels produced by retailers the likes of Wal-Mart (Faded Glory brand), Target Corporation (Mossimo and Merona brands), and JCPenney (Arizona brand).

Company profits, meanwhile, rose 4% during the same reporting period, thanks to a decrease in the cost of goods sold; selling, general, and administrative expenses; and income tax expense.

Strategy

In March 2014 the company announced a global productivity initiative -- to be phased executed in phases over the next 12 to 18 months -- that when completed is designed to save it $175 million to $200 million annually. Actions include streamlining the company's product development, planning, and go to market strategies, as well as implementing supply chain and distribution efficiencies, among other cost saving measures.

Like many other apparel makers, which have traditionally relied on chain retailers and department stores to distribute their products in the US, LS&CO. is developing its own retail network to increase the global availability and visibility of the Levi's brand. In addition to opening company-owned stores, the jeans maker created the Signature by Levi Strauss and Denizen brands, sold through the mass market. In 2011 the Denizen entered more than 1,700 Target stores in the US. Abroad, the brand has developed a following in China and India. In 2013 it's also aiming to increase its profitability by focusing on its core products, including the 501 jean and Dockers khaki pant.

LS&CO. simultaneously is aiming to take advantage of its category and brand strength. In its first-ever global product launch, it introduced Levi's Curve ID jeans for women, which is reportedly selling ahead of the brand's overall growth. It also developed the Water<Less jeans; targeting eco-conscious consumers, the jeans use up to 96% less water in the washer's finishing process than traditional jeans.

The company is also looking for a boost from developing markets. Licensing deals have opened the door. LS&CO. has entered into regional licensing agreements with a number of manufacturers to produce, market, and distribute its products in Latin America, the Middle East, and the Asia/Pacific region. It considers key wholesale accounts in the US and Europe to be vital elements of long-term growth strategies.

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