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Levi Strauss & Co (US)

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Levi Strauss & Co, the company which invented the concept of blue jeans, is still weathering the chill wind of changing fashion. During the 1980s and 1990s, Levi's turned streetwear into a fashion statement. By the mid-1990s, the company was chalking up sales of over $7bn. But when change came, it came fast. A move away from denim by core consumers, coupled with a huge increase in the number of rival manufacturers at all price points severely dented performance. Within two years, market share had halved, and profits plunged from over $1bn in 1997 to net losses in 2003. Performance has improved somewhat since then, but Levi Strauss is still under considerable pressure, hampered by its dependence on just one comparatively narrow market segment.


Who handles advertising? Click here for Agency Account Assignments for Levi's. The company declared advertising & promotion expenses of $400m in ye Nov 2018.


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Levi Strauss is the world's best-known jeans brand, but it's hard to see much chance of the company regaining its former glory without a substantial overhaul. Iconic or not, what kind of future lies in store for a company which derives around 85% of its annual revenues from selling pants? And only really two sorts of pants at that, which are also sold by just about every other clothing manufacturer on the planet. Either Levi Strauss needs to diversify substantially, and bolt on other brands or - more likely in the long run - needs to sacrifice its long cherished but out-of-date independence and become part of someone else's larger multi-brand portfolio. These years of struggle against a vast array of competitors have merely added to the gradual erosion of the brand. The development of value line Signature helped for a while, but after doubling in size during 2004, its contribution has steadily decreased ever since.

In the late 1990s, Levi's became a victim of their own success. Too involved in corporate restructuring, the company effectively ignored a seismic shift in the youth market. In the 1980s and early 1990s, Levi's 501 jeans had managed to dominate the market for everyday clothing as a result of high quality manufacturing and smart marketing. There were many kinds of jeans, went the general perception, but Levi's was the brand to which all others aspired. A brilliant marketing campaign, especially in Europe, reinforced the brand's hip status. But in the late 1990s, Levi's jeans suddenly became a victim of their own success. They were seen by the new generation of teenagers as "the jeans my Dad wears", and that put them completely out of fashion. Fashions in cut came and went but Levi's failed to respond, leaving the market wide open for competitors.

The company's biggest mistake, arguably, was to ignore the baggy cut, which rode in on the back of the mid-1990s grunge movement, and remained the leading fashion style for the rest of that decade. While Levi's stuck rigidly with the 16-inch straight-leg cut that appealed to the now ageing market who had rediscovered the brand in the 1980s, even the least hip of US retailers began selling extreme-cut. Millers Outpost, Tommy Jeans, JNCO and even JC Penney and Sears were selling jeans with legs as wide as 23 or 40-inches. The fashion-conscious teenage market began buying their jeans from other manufacturers, while a new breed of retailers, led by The Gap, captured the middle ground. Protecting their premium status, Levi's refused to chase the market and strictly adhered to their long-established policy of only selling through specialist outlets and avoiding discount stores such as Wal-Mart. Although this held the brand's perceived value it also restricted sales to only around half of the US retail market. Worse still, later that decade the market as a whole began moving away from denim altogether as combat and cargo pants became the new fashion.

Levi's share of the denim market plummeted. In 1990, according to Tactical Retail Monitor, more than 48% of men chose Levi's as their preferred choice of jeans. By 1998, this had tumbled to 25%, while Lee and Wrangler had risen from 22% to 32%, and private label brands including Gap from 3% to more than 20%. In sales terms the brand slipped from a 30% US market share to 14%. (Upmarket designer labels such as Tommy Hilfiger and Calvin Klein got a great deal of publicity but never achieved more than around 7% of the market). The percentage of teenage boys who thought Levi's was a "really cool" brand had dropped from 21% in 1994 to just 7% by 1998. Levi's position has, for the most part stabilised since then, but competition remains intense. Levi's is still the biggest player in the US, but this is a highly fragmented market of which Levi's had only 12.1% in 2017 according to Euromonitor. Biggest rival VF had 4.8% but there is a long tail of other competitors.

The Levi's brand now houses several sub-brands. Chief amongst these is Levi's Red Tab, which accounts for the majority of all volumes. It includes the legendary 501 button-fly design. (The number 501 was originally the product's stock number, first adopted in 1890; the red fabric tab was first used in the back pocket from 1936). Levi's Vintage features a broader range of "classic" retro designs. In pursuit of the youth market, the company has tried to turn back the tide with more extreme cuts, such as Levi's Engineered Jeans, introduced in 2000 and supposedly designed ergonomically to fit the body's contours. Some cuts are even pre-stained with oil. Another stylised new design launched in early 2003 as Levi's Type One. These offered exaggerated versions of traditional features such as rivets, stitching and the tab, blown up in size. However sales were slow to take off, especially in the US, despite high profile marketing, including a Super Bowl ad (which the company later claimed admitted was unsatisfactory). They, along with another stylised line known as Silvertab, were replaced by the Levi's Capital E line. Levi's ICD, a partnership with Philips to market workwear with "integrated" electronic devices such as mobile phones, MP3 players etc, was withdrawn in 2002.

The group also licenses out the Levi's brand to other manufacturers for branded T-shirts and accessories. Levi's is primarily a menswear brand, with almost three quarters of all pairs sold bought by men. Combined sales were in decline for several years in the 2000s, falling to under $3.2bn by the end of the decade. Since then, there has been a steady increase to $4.8bn in ye 2018, or 86% of sales.

After its many attempts to introduce more stylized or fashion-oriented designs had failed, the company agreed to abandon its premium positioning and chase the mass-market as well. A new design, Levi Strauss Signature, launched in July 2003, initially available exclusively through Wal-Mart. By the end of the year it had become apparent that the new line was the much-needed hit for which the company had been searching. The group rebranded the range as Signature by Levi Strauss, extended distribution to Target Stores and Kmart in 2004, and also introduced the range into selected mass-marketers in Australia (including Coles Myer's Target and Kmart), Japan and other Asian markets. It was also launched in the UK (through Asda), France (through Carrefour), Germany (through Wal-Mart) and Switzerland (through Migros), but performed poorly and was withdrawn in 2007. Yet after a strong start, sales of the Signature line fell steadily after 2005, declining from a peak of around $410m that year to around $170m by 2010.

That year, the group launched a completely new line of jeans in China under the name Denizen from Levi's. Priced above local competitors but at around half the cost of the main Levi's brand in China, the label was rolled out across other developing Asian markets and then launched in the US in 2011 exclusively through Target stores. A year later, the group shuttered the Denizen sub-brand in Asia in order to redirect its focus on the core Levi's brand. Denizen continues to be sold in the US. Sales have increased in recent years, rising to $390m in ye 2018 (or 7% of sales).

Dockers, first introduced in the US in 1986, is the company's khaki-based casualwear line. It was launched as a response to inroads into the market by Gap and others, serving as a halfway point between jeans and smarter dress pants. Dockers Slates, a sub-brand of dressier and more expensive trousers, was discontinued in 2004. Although it has been generally successful, Dockers remains very much the second string in the group's portfolio behind its jeans line. In 2004, Levi Strauss put the Dockers brand up for sale in order to concentrate on its still struggling core business, but failed to attract a suitable buyer. Sales of the brand were reported at $1bn for 2003, but had fallen to around $775m by 2005, with sales concentrated in the US. Since then Dockers has been repositioned as a wider casualwear brand, diversifying into shirts, sweaters and blazers, as well as a line of women's clothing. The unit was rewarded with an increase in revenues for 2006, its first for several years, and sales peaked again in 2007 at around $916m. Since then, though, there has been another steady decline. For ye 2018, the brand generated sales of just $390m (or 7% of sales). The group also generates income from royalties on Dockers belts, footwear and other accessories manufactured by other companies under license.

Levi Strauss has production facilities and customer service centres throughout the world. Until comparatively recently the company maintained a policy of manufacturing its goods in the regions in which they are sold, but rising labour costs and declining sales made this increasingly unfeasible. Production in the US and Europe began to be farmed out to cheaper regions in the late 1990s. Having already closed six of its US factories by 2003, the group announced that the remaining four in North America would also be shuttered by early 2004.

The group supplies its products to around 50,000 retail outlets worldwide, including department stores and specialty retailers as well as around 3,000 dedicated Levi's or Dockers branded stores or concessions. It owns and operates around 825 of these and franchises or licenses the rest. More than half of these stores are located in the Asia Pacific region. Otherwise sales are through department stores and national chains.

The group operates comparatively few major sponsorship partnerships, but has naming rights over the new home of the San Francisco 49ers football team, the Levi's Stadium, which opened in summer 2014.


Group revenues peaked in 1996 at $7.1bn, before going into steep decline in the late 1990s and early 2000s. They slipped below $5bn in 1999 and hit a low of just under $4.1bn in 2003 before rallying to $4.3bn by 2008. Recession caused another decline the following year to a new low of just $4.0bn. Since then, topline has gradually and slowly recovered, albeit with the occasional reversal. Net income has been similarly mercurial. For 2016, revenues edged up a little over 1% to $4.55bn. Net income continued to bounce back, jumping 39% to $291m partly as a result of as a result of a virtual elimination of restructuring charges.

Fot fiscal 2017 revenues hit $4.90bn, the best result for almost 20 years. Operating profit also hit multi-year highs. Net income slipped 2% to $281m as a result of exceptional charges for early debt pay-offs and other charges. Pants of different types accounted for 72% of total volumes of products sold in ye 2017 (down from 85% four years earlier); and men's products for 72% of sales, or $3.5bn.

Revenues for the year to Nov 2018 hit a new 20-year high of $5.58bn. Net income was up modestly to $281m, but that figure included a large one-off tax charge. Pretax income jumped 43% to over $500m. There are three regional business units: Levi Strauss Americas operates local subsidiaries in the US, Canada and Mexico, and accounts for 54% of revenues, or $3.04bn in 2018 (compared to a peak of $4.8bn in 1996). Levi Strauss EMEA is the second biggest market. After years of flat performance there has been strong growth since 2017, with sales up 25% in ye 2018 to $1.64bn. Asia Pacific remains the smallest market, at $887m.

Levi Strauss & Co is privately owned and controlled by descendants of its founder. Separate affiliate Levi Strauss Japan is publicly traded in its home market, but Levi Strauss & Co controls 84% of its equity.

Members of the Haas family own approximately 59% of the company's shares, with most of the rest distributed between family members' charitable foundations and senior executives. The biggest shareholder is Miriam "Mimi" Haas, widow of Peter Haas Sr, with almost 17%. Two of his children by an earlier marriage share a further 28% between them and nephew Bob Haas, who served as CEO from 1984 to 1999, has almost 11%.


In 1853, Bavarian immigrant Levi Strauss arrived in San Francisco to establish a dry goods business similar to one run by his brothers in New York. Many of his customers were would-be prospectors en route to Alaska in search of gold. Hard-wearing clothing was in particular demand, so Strauss began to sell canvas workpants alongside his other lines. In 1872, he was approached by tailor Jacob Davis who had designed a line of tough overalls, held together with copper rivets for extra strength. These "waist overalls" were made from a cotton-based fabric called serge denim, one of the toughest cloths he could find. (The material originated in France in the 1600s and was originally known as "serge de Nimes" after the town where it was made). Davis couldn't afford to apply for the patent himself, so suggested that he and Strauss become partners. These extra-strong trousers were hugely successful, and soon became known by the stock number - 501 - which differentiated them from other clothing. (The other well-known Levi's trademark, the red tab label, wasn't introduced until 1936).

Towards the end of the century, Strauss, now a wealthy man, left the business in the hands of his nephews while he devoted himself to philanthropic works in the city. By the time he died in 1902, his company was one of San Francisco's best-known businesses. With no heirs of his own, the company passed to the children of his sister, Fanny Stern, and it has remained under the control of her descendants - the Stern and Haas families - ever since. Rivet inventor Jacob Davis's son Simon also came into the business. He designed the company's first children's clothing in 1912, known as Koveralls. This denim playsuit was the first item of Levi Strauss clothing distributed nationally in the US; the company's jeans were not available nationally until the 1950s.

World War II brought international expansion as US army personnel took Levi's denim workwear around the world. As lifestyles changed after the war, denim quickly became leisure wear, referred to as "jeans". In fact, the term was something of a misnomer. Although also used for workwear, jean is a different kind of fabric from denim, cheaper and less durable. Levi's only began to describe its own "waist overalls" as jeans in 1960, following the public habit. Much of the expansion of the next 40 years was overseen by brothers Walter and Peter Haas. In 1954, they launched a range of Denim Family clothing but the huge popularity of jeans, particularly among teenagers, soon gave the material a bad reputation. A 1958 newspaper article reported that "about 90% of American youths wear jeans everywhere except in bed and in church", but it was its association with the new rock 'n roll and "juvenile delinquents" that made the most headlines. In 1959, the company began to export to Europe, and during the 1960s, jeans became the international dress of teenagers. Pre-shrunk jeans were launched in 1963. The company introduced a line of non-denim slacks, under the Sta-Prest brand, in 1964.

In 1971, after more than 100 years as a private company, Levi Strauss & Co went public, but the next few years were not happy ones. The business over-expanded with the funds raised by floatation, buying Koret sportswear, and the Brittannia and Oxford clothing lines. By 1984, Levi Strauss was in trouble. That same year, a new member of the family took over as president. Robert Haas was the founder's great great grandnephew and had formerly been a consultant at McKinsey. He launched a major restructuring of the company, selling off unprofitable lines and closing plants. (Mass-market jeans line Brittania was sold to rival VF Corporation). The following year, the family bought back all the company's public shares in what was then one of the largest leveraged buyouts in the clothing industry.

In the US, Haas supervised the launch of Dockers' khaki pants in 1986. (Europe had to wait until 1994). More importantly, he organised a relaunch of the Levi's brand. In the US, ad agency FCB began a series of acclaimed ads which updated the brand's 1950s' reputation by associating it with cool blues and rock music. In Europe, a new British agency, Bartle Bogle Hegarty, was given responsibility for marketing the brand and began a series of ads which captured the public's imagination for almost 10 years, and pushed a series of old soul hits to the top of the pop charts. The best-known ad, Launderette, featured a good-looking boy stripping off in his local laundromat to wash his 501s, to a soundtrack of Marvin Gaye's I Heard It Through the Grapevine. Sales of 501s in Europe jumped 800% as a result, and a series of follow-ups firmly established Levi's place at the heart of imported American culture.

As sales grew both at home and internationally, Haas turned his attention to Levi's corporate policy. He introduced a series of work-share schemes designed to give employees a voice in the company, instigated a mammoth $850m re-engineering programme at the company's manufacturing plants, and then pushed through a $4.3bn buy-back of employee-owned shares. Slates dress trousers were introduced in 1996, the company's first new product launch for almost ten years (they were later merged into the Dockers range). That year the company celebrated record sales of $7.1bn and a profit of more than $1bn.

However there was trouble in store. By the late 1990s, the brand had become a victim of its own success. Levi's were seen by the new generation of teenagers as "the jeans my Dad wears", and that put them completely out of fashion. The company's share of the fast-expanding denim market plummeted from more than 30% in 1990 to around 14%. Worse still, denim itself was abandoned as uncool in favour of cargo or combat pants. The group's sales dipped in 1997 to $6.9bn, then fell a further 13% the following year to $6bn in 1998. As a result, the company announced the closures of 29 manufacturing centres around the world in 1997 and 1998, shedding 30% of staff. It also sold off most of its retail outlets to licensees, retaining only a new flagship store in New York and the Levi's Online Store. The only good news was a strong performance from Dockers Khakis, which (briefly) became a $1bn brand, while Slates dress trousers came close to generating $500m in the US. In just three years from 1996 to 1999, Levi Strauss' market value shrank from $14bn to about $8bn, while crosstown San Francisco rival Gap blossomed from $7bn to over $40bn.

Reacting late to the fact that a major contributing factor in the fall in sales was the move away from denim, Levi's boosted its marketing of non-denim products to the youth market. In Europe the company introduced Flat Eric, a yellow woolly glove-puppet, as the marketing icon for the Sta-Prest sister brand. The ad had Levi's target market talking about the brand again for the first time in years, and was a return to form for agency Bartle Bogle Hegarty, whose work on the main Levi's account had begun to weaken. Word-of-mouth turned Flat Eric into a cult hero for trendy clubbers, and the puppet became the unlikely artist behind a #1 dance record. Suddenly, Levi's was stylish again, but in a much smaller way than before.

In 2000 the company introduced a new line of "engineered" jeans, a reinvention of the traditional five-pocket Levi's, featuring twisted seams. However new CEO Philip Marineau confirmed that 1999 sales had slumped by a further 14% to $5.14bn. A year later, sales were still falling, although the company claimed to have slowed the rate of decline. In Spring 2002 Levi Strauss said it would close six factories in the US with the loss of 3,300 jobs, or 20% of its workforce. Instead it attempted to save money by contracting out manufacturing into cheaper countries. Later that year, in a major change of strategy, the company announced that it would launch a new jeans line, Levi Strauss Signature, initially sold exclusively through Wal-Mart. Previously the company had actively prohibited discount retailers and supermarkets from selling its products.

However the company was also plagued by accounting concerns. Mid-year, two former employees filed a lawsuit alleging tax and accounting fraud. No evidence of this was uncovered by an investigation of the group's records, although minor errors were found in tax documentation. Later the company was forced to restate financial results for 2001 as well as the third quarter of 2003 after finding that it had made the same tax deduction twice.

Last full revision 2nd March 2018

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