3rd Time’s No Charm: Drop in 1st Qtr. Sales Dims Levi’s Recovery

Levi’s trip on the road to recovery hit a nasty pothole in the first quarter, but the Wal-Mart steamroller is coming soon to smooth the way.

Company officials on a conference call with debt analysts declined to say whether that launch was the main reason they were confident overall sales for the year would be up. But they acknowledged that Levi’s is expecting growth in revenue on its existing brands to lag growth in unit volume.

That’s because Levi’s plans to cut its wholesale prices in June — a move intended to make the brand more profitable for other retailers at right about the time the company starts shipping the Bentonville behemoth.

Privately held Levi’s reports its financial results because of public bonds.

Another key new push for Levi’s this year is Type One jeans, a style featuring bright-colored stitching and other exaggerated details. The company plans to spend the entire budget for the Levis brand this year promoting those jeans. Levi Strauss said it spent $68.8 million on advertising in the first quarter, up 4.1 percent from last year. The corporate ad budget also includes spending on the Dockers brand.

Marineau told WWD he wasn’t satisfied with the company’s initial TV push for the Type One product — during the Super Bowl it ran an ad featuring a stampede of cattle through a postmodern city.

"I don’t think people are walking away from the commercial understanding what Type One jeans are all about and why they are different from a regular pair of Levi’s," he said. "We thought it was a little too serious and didn’t have enough fun and excitement. It might have been a little pretentious."

He added that the company has been pleased with its print ads for the new products and does not plan to resume broadcast advertising until fall, in keeping with its initial plan.

A bigger question than the public’s reception of the ads is whether consumers warm to the new style of jeans. Marineau said that the Type One styles have sold very well in Europe and Asia — in some cases outstripping the company’s ability to produce them.

On the conference call, analysts asked Marineau whether he feared Type One would mark a repeat of the company’s push for Engineered Jeans, which sold well in Europe and Asia but never caught on in the U.S.
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