Levi Strauss & Co.:

Corporate profile

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Levi Strauss & Co.: Corporate profile

Levi Strauss & Co.: Corporate profile

Author: Stacy Baker

Published August 2003

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Levi Strauss & Co.: Corporate profile i

Table of Contents

Table of Contents ................................................................................................................................................................... i

Overview................................................................................................................................................................................. 1

Strengths................................................................................................................................................................................ 3 Levi proves as tough as denim................................................................................................................................................ 6

Reconnecting with consumers ............................................................................................................................................ 9

Retail distribution ................................................................................................................................................................ 11

Regaining executional excellence ..................................................................................................................................... 13

Principal sources................................................................................................................................................................. 15

All content copyright © 2003 Aroq Limited Overview

Levi Strauss & Co.: Corporate profile 1

Overview Founded in 1853 by Bavarian immigrant Levi Strauss, Levi Strauss & Co

(LS&Co) is one of the world's largest brand-name apparel marketers with sales

in more than 100 countries and distribution from more than 500 contractors

worldwide. The company designs, manufactures and markets apparel for men,

women and children, including jeans and jeans-related pants, casual and

dress slacks, shirts, jackets, skirts and related accessories.

Headquartered in San Francisco, California, LS&Co employs approximately

13,000 people in more than 40 countries and owns and operates 21 production

and finishing facilities, 20 distribution or customer service centres, and

numerous sales and marketing offices. Today, the Levi's trademark is one of

the most recognised in the world and is registered in more than 160 countries.

Despite its glowing heritage, the company’s financial performance is less than

stellar, a slide that began in 1996. Levi’s execs attribute the downturn to being

inattentive to consumer needs, relying on its heritage, inefficient logistics,

domestic production, poor relationships with retailers and a decline in

department store business – Levi’s primary channel.

Levi’s has been battling to reverse its situation with a major 5-year business

turnaround, “The Great Levi Strauss & Co Turnaround.” The turnaround is

based on three parts: gaining control of the business, steadying sales and

realising profitable growth and is aimed at stabilising revenues and expanding

the business within the next few years.

To make this happen, the company brought in Philip Marineau in 1999. Since

his hire, he’s instituted a number of major changes designed to improve

relationships with retailers and increase margins, such as updating inventory

systems, closing domestic factories in favour of overseas sourcing, revamping

its executive force and cutting costs.

Levi’s sales this fiscal year will rise 2 to 5 per cent above last year’s $4.14

billion, speculate Levi’s executives, down from $7.1 billion in 1996 when its

revenues peaked, according to experts.

Despite ending the last two quarters of fiscal 2002 with strong sales, the

company ended the year with its sixth straight annual sales decline and a

steep slide in profits (down 83 per cent to $25 million), say reports.

All content copyright © 2003 Aroq Limited Reconnecting with consumers

Levi Strauss & Co.: Corporate profile 9

Reconnecting with consumers Key to reconnecting with consumers is that Levi’s stops focusing entirely on its

heritage and takes a multi-pronged approach to growing multiple brands

globally, according to experts.

Its strategy must leverage brand equity and generate “news” through relevant

and innovative product offerings. In 2000 the company segmented the

marketplace better and designed and delivered relevant products and

marketing programs to a broader range of consumers, which should propel the

company in the right direction.

The result has been recent launches like Dockers stain-resistant extensions in

chains, Type 1 and super-low-rise men’s jeans, Levi’s Vintage Clothing and

Levi’s Red Tab in specialty stores, Levi’s Premium and Special Edition at high-

end department stores and trendy chains, and the Signature label through

discounters. Marineau has stated that spring 2003 marks the first time the

company will offer a women’s jeans line that is equal to or better than the

men’s line.

“New fits and innovative finishes in the Levi’s brand have improved our brand

relevance scores with consumers and helped us gain market share this year in

the US men’s jeans market,” says Beckman.

He also cites innovations from the Dockers brand in recent years like the

Mobile Pants in 2001, Go! Khaki with Stain Defender in 2002, and new

Individual Fit Waistband technology in 2003. “These products have led

innovation in the category and after several years without any significant news

in the khakis arena, given men a compelling reason to get off the couch and go

buy a new pair of pants. These products have all performed extremely well in

the market.”

Analysts, however, have yet to see the sales gains from innovation and are

taking a wait-and-see attitude towards the Signature launch to see if Levi’s is

truly reconnecting with consumers.

All content copyright © 2003 Aroq Limited Retail distribution

Levi Strauss & Co.: Corporate profile 11

Retail distribution LS&Co maintains collaborative relationships with retailers worldwide. It

distributes its products through a number of selected retail channels, including

department stores, chain stores, specialty stores, dedicated franchised stores,

outlets, Internet sites and mail-order catalogues.

Approximately 3,000 retail customers, operating in more than 16,800 locations,

sell LS&Co apparel in the United States and Canada. European retail

customers include large department stores and independent retailers that

operate either a single or small group of jeans-focused stores or general

clothing stores. In Asia Pacific, more than half of that region’s sales are

generated through the specialty store channel, which includes multi-brand and

franchised Original Levi’s Store retail shops.

Worldwide, there are approximately 750 franchised or other independently

owned stores selling LS&Co apparel under the “Original Levi’s Store,” “Levi’s

Store” and “Dockers Store” names. These dedicated-format stores are

important vehicles for demonstrating the breadth of product lines, enhancing

brand image and generating sales.

To get retailers on board with Levi’s, the company is offering more competitive

margins and volume incentives, as well as upgrading presentation at retail.

One analyst believes this strategy could prove to be very successful – in

essence Levi’s is making it more profitable to sell its line than any other brand.

The company has also revitalised its relationships through collaborative

account planning, with each side better managing the mutual business. By

building account-specific, annual and long-term tactical plans with its retail

customers, LS&Co is ensuring that the right products are available at the right

time for consumers.

While Levi’s has improved delivery times in the past two years, Marineau is

committed to making more incremental improvements in 2003 to increase

timeliness and accuracy, according to Beckman. There have been glitches,

though. February traffic and retail sales, for example, were lower than

expected and forced inventories even lower, which caused Levi’s to lose a

substantial amount of core replenishment orders, Marineau said in a report.

All content copyright © 2003 Aroq Limited Principal sources

Levi Strauss & Co.: Corporate profile 15

Principal sources APS Financial Research Reports - Levi’s, 10.15.02

Australian Financial Review, 4.30.03; Levi’s Blue as it Slides into Red

Business Wire, 3.25.03; LS&Co Announces First Quarter 2003 Financial

Results

Business Wire: www.businesswire.com

DNR, 11.04.02: Levi’s Move to Mass: Will It Revitalize or Cannabalize?

DNR, 5.12.03; “Levi’s Launches Dockers Sub-Brand”

Fair Disclosure Wire, 3.25.03; Levi Strauss Conference Call

Hoovers (www.hoovers.com)

Jeff Beckman, title TK, original interviews, 6.03

Levi Strauss & Co FY 2000 Annual Report, 2001 Annual Report, 2002 Annual

Report

Levi Strauss website: www.levistrauss.com

Levi Strauss & Co 10Q, U.S. Securities and Exchange Commission

Los Angeles Times, 1.14.03; Levi is Slowly Turning the Corner on Revenue

Los Angeles Times, 6.27.03

NPD World News, 5.23.03

Piper Jaffray’s Daily Market Report, 6.26.03

Pivotal Magazine, Supply and Demand

All content copyright © 2003 Aroq Limited Principal sources

Levi Strauss & Co.: Corporate profile 16

Reuters news articles:

• Levi Sales and Income Dip, Michael Kahn, June 20, 2001

• Weak Markets Hurt Levi Strauss Earnings

• Levi Earnings Down on Weak Retail Markets

San Francisco Business Times (www.sanfrancisco.bcentral.com/sanfrancisco)

The Nikkei Weekly, 2.24.03; Levi’s Back in the Saddle with New Strategy

The San Francisco Chronicle, 3.26.03; Levi Posts Loss in Quarter

The San Francisco Chronicle, 4.30.03; Ride Lode, Heavy Load

The San Francisco Chronicle, 1.14.03; Wind in Its Sales

The San Francisco Examiner, 10.31.02

WWD, 11.07.02; Levi’s: Growth in 2003

WWD, 1.14.03; Make it a Double: Second Straight Rise in Levi Sales

WWD, 5.01.03; Evolution of an Icon