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Levi’s Denies Wrongdoing
This story first appeared in the April 17, 2003 issue of WWD. Subscribe Today.
Levi Strauss & Co. this week denied claims that it used irregular accounting to inflate profits. Those charges were made in a lawsuit filed against the company in California Superior Court in San Francisco by two former employees who had been fired in December.
The employees are Thomas Schmidt, a tax attorney, and Robert Walsh, an accountant, according to filings with the California court. They claim that they were fired for refusing to keep financial records from tax authorities and auditors.
“The two former employees who filed the lawsuit were dismissed late last year for reasons completely unrelated to the allegations made in their lawsuit,” Phil Marineau, Levi’s president and chief executive officer, said in a statement. “Unfortunately, they have chosen to respond to their dismissal by making false claims in litigation.”
A Levi’s spokesman said the auditing committee of the company’s board ordered a complete investigation into the claims when they were made last year, hiring outside auditors and legal counsel to ensure the review would be fair. He said that investigation found no evidence of improper accounting.
Levi’s added that Monday’s lawsuit came in connection with an unlawful termination lawsuit filed by Schmidt and Walsh. The Levi’s spokesman declined to say why the two men were terminated, citing privacy concerns.
Frank Bondonno of Popelka & Allard, the San Jose, Calif.-based attorney representing the two men, did not respond to calls seeking comment.
San Francisco-based Levi’s is privately owned, but reports its financial results because of public bonds. The company has been in a sales slump since 1996, with sales reaching $4.14 billion last year, as reported. The company has been profitable through much of its sales decline, though rising expenses and other costs related to its debt drove the company $24.5 million into the red in its first quarter, when sales slipped 6.4 percent. Levi’s executives have contended that this year will mark the end of its sales decline, saying that growth in the second half will leave overall sales for the year up 2 to 5 percent.
— Scott Malone
The Montreal-based jeans company Manager is making a push into the U.S. market with a higher-priced line called Blue One.
The line, which launched in Canada last year, is rolling out in the States for fall retailing, with initial shipments targeted for June, according to Northeastern sales manager Natalie Cole.
The line includes five fits of jeans, ranging from low-rise boot cut to super-low flare, in eight denim washes and in alternate fabrics, according to Cole.
Steve Kohn, the company’s Fort Lauderdale, Fla.-based national sales manager, said he believes the brand will compete with “the California megabrands” in the over-$100 denim market.
Wholesale prices on the jeans range from $40 to $47.50, above the price of Manager’s main line, which sells jeans for about $10 less a pair. The Blue One jeans are manufactured in Montreal and Hong Kong.
Kohn last worked for another Canadian jeans maker, Parasuco Jeans Co.
Cole said the company hopes to do $1.5 million to $2 million in sales during its first year in the U.S.
“It’s easy to get the volume,” she said, “but we want to get into the right stores.” She said the company will be targeting better specialty stores and boutiques.
Younique Shuffles Its Mix
With teens’ ardor for jeans fading after several years of strong demand, junior jeans resource Younique Clothing is starting to soft pedal its denim assortment in favor of alternate fabrics.
In an interview, vice president Robert Regina called the change good “because there’s a chance to work on new fabrics.”
For fall, the company’s assortment of bottoms is still heavy on denim, with that fabric representing about 60 percent of the assortment, he said. But, he added, “by the third quarter, fourth quarter, it might be 50-50” or even inverted from its current level.
Regina said he’s been surprised by the strong performance of nondenim fabrics in recent months, with teens snapping up looks including colored satin pants from Younique, which brings in annual sales of about $65 million.
“There are times when I look at a garment and think, ‘Oh, my God, that’s not going to sell,’ and then it takes off,” Regina admitted. He said the slow economy makes it more important for designers to introduce novelty styles for teens, to encourage them to keep spending.
“When business gets tough, sometimes people want to go with the safe products,” he said. “But that’s not the right strategy with junior shoppers.”
Express Tags Up
Retail chain Express unveiled its 2003 denim collection last week at an event with go-go dancers, DJ Spencer Product and a trio of Brooklyn-based electroclash singers called Whatever It Takes.
Express, which operates 1,027 stores, held the event at the former Powder space in Manhattan’s Chelsea on April 8. Titled “Art From the Waist Down,” the party combined the talents of 21 artists, designers and photographers, who were commissioned to create hangtags for each denim style sold at Express. One is a working air freshener, another is shaped like a matchbook and features a foldout collage of images. The new dual-gender Express will introduce the hangtags in stores beginning early in July. Tags will be updated seasonally, as new denim styles are shipped to Express stores. Express denim retails from $45 to $200.
Betsey Johnson and Damon Dash were seen mingling with members of the Express design team as well as other invited guests. When W.I.T. took the stage, dressed in Express denim miniskirts, guests were dancing to their tunes, which the group reworked to include the company’s name in the lyrics of one song.
— Julee Greenberg
Jeans for Other Womyn
After adding jeans to its Womyn sportswear line last year, New York-based GM Design Group has decided to break denim out on its own, in a spinoff line called By Womyn.
The jeans, which will wholesale for $64 to $74, are being launched for fall retailing.
The Womyn line already sells in more than 900 specialty stores in the U.S., and jeans have come to represent 20 percent of its volume, according to designer J.R. Morrissey. He said that breaking the jeans out on their own may allow wider distribution.
In addition, the company plans to move its jeans production to Los Angeles to make it more efficient and able to reach the stores at a faster pace.
“The stores’ response to our denim coupled with reorder demand on just a handful of styles was the driving force behind this new label and the company’s focus on creating a denim line to fill the void,” said Jo Ann Langer, president and ceo of GM Design Group.
Morrissey also designs the Womyn line that includes jeans, T-shirts and jackets. He said the focus of the new label will be purely on denim pants to expand distribution and brand recognition.
“Womyn is recognized by the customer as an excellent-fitting pant and the Womyn label was designed to emphasize that our jeans line will stay true to the brand focus,” said Morrissey.
The company projects the line will bring in more than $6 million in 2004.