Silver Lining, Gray Clouds: Levi’s Improves but Outlook Gloomy

Levi’s is reporting a 9.7 percent first-quarter sales gain and a narrowed loss, but ceo Phil Marineau said he’s swimming against the economic tide.

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As part of the overall campaign to cut costs, Levi’s officials said they were streamlining assortments, reducing the number of styles offered and eliminating unprofitable product lines. Marineau added that Levi’s also was repositioning its Silver Tab line, which is priced slightly higher than the Red Tab brand. Last year, he said, the Silver Tab line sold poorly after being given an urban feel, so the company is pulling it back toward Levi’s core mainstream American look.

Marineau added that the company will continue to consider opportunities to license out product categories. Levi’s early this year licensed the rights to knit and woven tops and women’s jackets to Hong Kong sourcing giant Li & Fung, and is in talks about licensing men’s and boys’ shirts to the company. It also has licensed women’s tops to Van Nuys, Calif.-based Jerry Leigh.

“Our strategy is to really focus on being a bottoms marketer for men and women of casual pants and jeans,” said Marineau. “Our expertise is not in tops and it’s not in kids’, and in general, we are going to license where it isn’t a core expertise of the business.”

Overall, he backed away from making any promises about the company turning around sales in its core Levi’s brand this year, citing overall economic concerns and what he called a softening apparel market.

“There is a huge opportunity on the core Levi’s business for the balance of the year,” he said. “It’s highly dependent on the market conditions that we face.”

Marineau said macroeconomic factors — such as the steep rise in fuel prices — would continue to take a toll on spending for discretionary items such as apparel.

“Given the number of people who drive a car to work every day,” he said, “high prices at the pump will affect them.”
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