NEW YORK — Phil Marineau had a succinct explanation Monday for why Levi Strauss & Co. decided to pull its Dockers brand off the selling block: “We weren’t going to give it away.”
Levi’s president and chief executive officer said in a phone interview, “We always said that this was a strategic choice that we were taking to try and strengthen the financial performance of the company by reducing the debt with a large paydown, but this wasn’t a desperation sale and we weren’t going to do it unless we got our full value for the business.”
Levi’s executives said that bidders failed to meet the target price the San Francisco-based company had set for the $1 billion casual pants unit.
“The buyer set was not getting to the right value, and we made the strategic decision to keep the business,” said Jim Fogarty, Levi’s acting chief financial officer.
Levi’s did not disclose what number it had been seeking, though sources said it was significantly higher than the minimum threshold of more than $600 million agreed to by its bondholders. Levi’s said in a filing last month with the Securities & Exchange Commission that its lenders had signed off on the sale so long as it reduced the firm’s debt by at least 30 percent. When Levi’s third quarter closed on Aug. 29, its total debt stood at $2 billion.
Sources said the firm had been holding out for $800 million to $900 million for the business, which it had put on the block in May.
“They just overpriced themselves,” said one financial analyst, who spoke on the condition of anonymity.
The news of the decision prompted Levi’s bonds to slip 3.5 cents to $1.03 on the dollar by Monday afternoon, according to financial sources.
The brand had attracted the attention of many of the apparel industry’s largest players and firms, including Li & Fung Ltd., VF Corp., Kellwood Co., Liz Claiborne Inc., Jones Apparel Group, Perry Ellis International and Haggar Corp., and several private equity groups were said to have considered making a bid. The business’ large size limited the pool of potential acquirers, and sources said Levi’s insistence on a price that exceeded 80 percent of revenue turned off many prospective buyers.During the sale process, several industry consultants who typically involve themselves in such deals said Levi’s wasn’t as forthcoming with information on Dockers as they would have typically expected from a seller.
Marineau noted that Levi’s has strengthened its financial position over the past year, since hiring turnaround specialists Alvarez & Marsal to advise it.
“This year we’ve paid down net debt by $100 million as we continue to improve our economic performance,” he said.
Last week, the firm reported that it swung to a $49.8 million net profit in the first nine months of its fiscal year, compared with a $104.2 million net loss a year earlier. The earnings were due to significant margin improvement, as sales were up just 0.8 percent in the period to $2.92 billion.
Dockers sales came to $603.9 million for the nine months. Sales in the U.S. were off 19.9 percent and in Europe were down 8 percent, more than offsetting 10.7 percent growth in Asia. In 2003, wholesale volume for the Dockers brand was about $1.36 billion, including licensed products.
While discussing the firm’s third-quarter earnings, Levi’s executives noted the company was allowing its sales to slide somewhat — they were off 8.2 percent in the third quarter — as it walked away from some less-profitable sales and tightened inventories. Marineau indicated Monday that the company would remain focused on the bottom line.
“We’ve strengthened the company’s financial performance tremendously over the course of the last year, with stable sales,” he said. “Our focus is going to hold to that for the next 18 months.”
Levi’s sales have fallen for the past seven years, from a peak of $7.1 billion in 1996. In recent months Levi’s executives have declined to make any projections as to when they would end the revenue slump, saying they were more concerned with margins.
Marineau said there’s room to improve Dockers’ performance.
“We saw the opportunity to do product development on a more global basis, rather than region by region, as we’ve been doing it,” he said.
Geographically, Levi’s is currently organized into three divisions: the Americas, Europe and the Asia-Pacific region. He added that Dockers would also seek to expand its sale of items other than pants.“We see some opportunities in sportswear that are perhaps greater than we exploited,” he added, offering few specifics.
Levi’s has been restructuring in earnest since bringing on Alvarez & Marsal in December. The apparel firm over that time slashed its head count by 22.8 percent to 9,500 and closed most of its few remaining factories.
Levi’s has also continued to roll out the Levi Strauss Signature brand into the mass market, growing distribution beyond Wal-Mart to include Target, Meijer, Shopko and Pamida, as well as international retailers. It’s in the process of shipping the line to selected Kmart stores. The company also launched a fall consumer advertising campaign for the Signature brand, which it initially said would not be advertised outside of stores.
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)
Breaking News: @hedislimane joins @celine as its new artistic, creative and image director. One of fashion’s preeminent image-makers and trendsetters, Slimane is to join the LVMH brand on Feb. 1 and unveil his first fashion proposition for men and women next September during Paris Fashion Week. It marks a major homecoming for Slimane, who cemented his reputation – and influenced men’s tailoring for more than a decade – as the designer of Dior Homme between 2000 and 2007. He went on to reinvent and ignite the house of Yves Saint Laurent, which he rechristened Saint Laurent, between 2012 and 2016 – all the while maintaining a close relationship with the Arnault family, which controls LVMH and Dior. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
“Personally I believe the Eighties have been the richest and more vivacious period for international fashion,” Giorgio Armani said when asked what his favorite decade of fashion is. It was a moment of disruption and experimentation and only thinking back to the first years of that decade is always an emotion for me, for what they have meant to me and my work.” The influence is clear in @giorgioarmani spring 2018 collection, pictured here, which was full of bright colors and unexpected prints. Read more about which decades designers loved most on WWD.com #wwdfashion #wwddecades (📷: @aitorrosasphoto)
For Lady Gaga’s only Italian show on her “Joanne World Tour,” the singer wore a range of @versace_official outfits. The standout piece: this custom-made bodysuit inspired by the brand’s spring 2018 collection. #wwdfashion (RG: @ladygaga)
@_camillaruth_ is expanding on the wellness-craze concept with @westbourne – a new NYC restaurant that’s both a healthy-minded café as well as a business that gives back to the community. Marcus works with the Robin Hood foundation to give back to The Door, a non-profit providing youth development services, and also hires employees through The Door. Read our full interview with Marcus on giving back through food on WWD.com. #wwdeye (📷: @lexieblacklock)