Levi Strauss Company Case Study

Levi's

Overview

Levi Strauss & Co. (LS&CO.) strives to provide the world's casual workday wardrobe, inside and out. LS&CO., a top manufacturer of brand-name clothing globally, sells jeans and sportswear under the Levi's, Dockers, and Levi Strauss Signature names in more than 110 countries. It also markets men's and women's underwear and loungewear. Levi's jeans -- department store staples -- were once the uniform of American youth, but LS&CO. has been working to reconnect with the niche and expand outside the US. It has 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 (relatives of founder Levi Strauss) owns LS&CO.

While Levi's is marketed as an authentically American brand, about 50% of the company's net revenues come from outside the US. LS&CO. operates in mature markets in the Americas, Europe, and the Asia/Pacific region. Sales in North America, Japan, and Western Europe have suffered in recent years for several reasons, including the downturn in the global economy, demographic changes, and increased competition from trendy lower-priced apparel offerings. For growth, the company is looking to developing markets, including Brazil, China, India, and Russia.

Also, like many other apparel makers, which have traditionally relied on department and specialty stores to distribute their products, LS&CO. is developing its own retail network to increase the availability and visibility of the Levi's brand. Currently, it operates about 1,900 company-owned and franchised stores and sells apparel online. Despite declining sales, LS&CO. added more than 150 company-operated stores in fiscal 2009, primarily through acquisitions in the US and Europe. Still, increased sales from its expanding retail network have failed to make up for declines in the company's wholesale business. Overall, net revenues fell 6.5% in fiscal 2009, during which time profits also declined by about a third.

Part of the decline in sales is attributable to growing competitive pressure. Through increased spending on advertising and selling as well as its store expansion, LS&CO hopes to regain some of the market share lost to rival VF Corporation (maker of Lee and Wrangler brand jeans and apparel) and others over the past decade. It has also been squeezed by makers of pricey, premium denim (True Religion, Diesel SpA) on the high end, and purveyors of trendy, low-priced denim (Wal-Mart Stores and JCPenney) on the low end. In response, the jeans maker created the Signature by Levi Strauss brand for the mass market, but with lackluster results to date. Sales of the company's value-priced brand have been essentially flat in recent years and accounted for just 5% in 2009.

Despite the increased