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Levi's Signature Set for Wal-Mart Racks

It's the jeans maker's first foray into discount market, where firm will offer the low-priced line.

October 31, 2002|Leslie Earnest | Times Staff Writer

SAN FRANCISCO — Levi Strauss & Co. wants to sell its blue jeans where America shops, and increasingly that's at the major discount retail chains.

On Wednesday, the San Francisco-based apparel maker said it struck a deal with Wal-Mart Stores Inc., the world's largest retailer, to sell a new line of lower-priced dungarees at its stores beginning in July.

Levi has struggled with declining sales since 1996 as jeans buyers flocked to other brands and migrated from department stores to discounters to buy their clothes, a trend that the introduction of its new Signature brand intends to address, Chief Executive Philip Marineau said.

The point is to "sell where people shop," said Marineau, who has been working to turn around the privately held company for the last three years, in part by introducing new products and creating better relationships with retailers.

Levi's Signature brand is expected to generate "hundreds of millions" in sales annually, Marineau said.

The company, founded 149 years ago, also is talking with other mass-merchandise chains about carrying the line, which will include denim pants, shirts and jackets for men, women and children.

More than 160 million people shop in stores such as Wal-Mart and Target each week, Marineau said, and more than a third of all jeans sold in the U.S. are bought in such stores.

After six months of discussions, the deal with Wal-Mart was completed last week, Marineau said. Levi will use no print or television advertising to launch the new products, relying instead on Wal-Mart to promote the line, he said.

Retail experts say Levi's move makes sense. Apparel companies increasingly are learning that they must tap into the lower-priced retail market or be "left in the dust," said Rozilyn Bryant, an analyst with Morningstar Inc.

Jones Apparel & Co. and Liz Claiborne have launched or acquired new brands to sell at lower-priced stores recently. These apparel makers and others "recognize that's where a lot of consumer dollars are going these days," Bryant said.

Levi's portfolio now will include the Levi's, Dockers and Signature brands. The Dockers line accounts for 20% to 25% of the company's annual sales of $4.3 billion.

Jeans in the new line will sell for less than $30, further widening Levi's already unusually broad price range for its apparel. The company sells jeans for as low as $30 to $35 in department stores such as Mervyn's, Sears and JC Penney and as high as $220 at Barney's New York.

Lois Mikita, Wal-Mart's senior vice president of men's and boys' apparel, described Levi Strauss Signature as "a great fit" with the retailer. The chain also stocks Bugle Boy, Wrangler and Faded Glory brands.

Marineau said that Levi's sales should stabilize by the end of the year and that the firm expects to see additional revenue growth in 2003.

In the third quarter ended Aug. 25, Levi sales rose 3.5%, the first quarterly sales gain since 1996. However, the firm's earnings dropped 9% on higher costs.

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