"We’re ready to roll again, both symbolically and in terms of product," said Phil Marineau, assessing the state of Levi Strauss & Co. at a conference with bondholders and financial analysts last week.
The San Francisco-based company has proven slow to turn around in the three years since Marineau became chief executive officer and president. But following its positive showing of sales growth in the third quarter —?ending a 22-quarter streak of declining sales — and with the upcoming launch of the Levi Strauss Signature line at Wal-Mart Stores, Levi’s executives are finally setting their sights on sales growth again. Their timetable is next year.
Bill Chiasson, senior vice president and chief financial officer, said the company expects to record sales gains of 2 to 5 percent next year. Presuming the company makes its target of flat sales in the fourth quarter that ends this month, that would leave next year’s sales up by about $80 million to $200 million.
Levi’s is looking for earnings before interest, taxation, depreciation and amortization to come in at 10.5 to 12.5 percent of sales, ahead of the 6.1 percent rate reported for the first nine months of 2002, but below the 13.1 percent recorded in 2001. Last year, the company earned $151 million on sales of $4.26 billion.
In fiscal 2003, Marineau said, Levi’s expects to "begin to grow again on a full-year basis and continue that growth over a multiple-year basis."
While the company expects 2002 to be the last of six down years for sales, Levi’s officials warned that the next three quarters might not be banner ones.
"The growth is going to come a lot on the mass channel entry," said Chiasson, referring to the Signature line due to hit Wal-Mart in July. "That mass channel entry is going to start in the third quarter. Most of the growth will come in the back half of the year."
While company officials have stressed that the mass launch is only a part of their turnaround strategy, the conservative growth forecast, coupled with Marineau’s projections of "hundreds of millions of dollars" in annual sales for the Signature line, suggests that sales improvement next year may hang on the performance of the mass line.Levi’s has pushed back its turnaround targets for a few years. In early 2000, a few months after taking the helm, Marineau said he believed sales growth might resume in fiscal 2001. However, the slowdown in the economy threw unexpected bumps in the company’s path.
Marineau also spoke candidly on the call about some of the missteps Levi’s has made in recent years.
"We were victims of our own success," he said. "Because we were so successful, because we had such a dominant position in the marketplace…we failed to react."
He noted that women’s product has traditionally been a weak spot for Levi’s, and said the company had needed to step up its efforts in the junior market where it faces "very aggressive competitors in LEI and Mudd."
Levi’s started to gain ground in that sector after launching Superlow jeans last summer, backed by a blitz of television ads depicting singing navels.
"Frankly, this was just to save our butts and stay in the junior market because we had become so uncompetitive," Marineau said. "It worked. The Superlows we introduced re-engineered our junior business and have given us permission to play again in that market."
The company was less successful with another launch in recent years. In 2000, it rolled out Levi’s Engineered Jeans around the world in an effort to reinvigorate the brand’s image. While the styles sold well in Europe and Asia, they never caught on in the U.S.
Marineau said he knew why: "It didn’t fit women well, except for the skirts and the jackets. The consumer had a product that really wasn’t as good as it should be for the women’s market."
Now that Levi’s has redesigned its core Red Tab styles and is phasing in its new Type One jeans, which feature exaggerated stitching and other details, Marineau said that has changed.
"As we go into the spring season for 2003, for the first time in the history of the Levi Strauss company, around the world, we will have a women’s jeans line that is equal to or better than the men’s product," he said.Levi’s plans to heavily promote the Type One styles. The entire advertising budget for the brand this year will be spent on Type One ads, including a 60-second spot to air during the Super Bowl. It’s part of the Levi’s strategy to roll out innovative styles at high-end price points, "seeing what works…and commercializing it as quickly as possible," Marineau explained.
The company’s most recent time frame for quickly developing new products for its high-end Levi’s Red and Levi’s Vintage Clothing lines and then knocking them off at lower price points is part of what Marineau calls a "customer segmentation strategy."
"The key is to get back to being the market leader, driving the styles, driving the trends…and focusing our advertising on that," he said. "Not focusing on a cool brand or a cool attitude or a cool approach, but focusing on product."
— Scott Malone
Isaacs Sees Loss
I.C. Isaacs & Co. Inc. warned investors Friday that the company expects to report a third-quarter loss as a result of lower-than-expected sales. The Baltimore-based maker of Marithé & François Girbaud jeans said it expects to report a loss of approximately $500,000 for the quarter ended Sept. 30. It expects to post revenue of $16.3 million, 35.3 percent below last year’s level.
"Sales failed to meet our expectations due to a sluggish retail environment and weaker-than-anticipated consumer response to our fall product line," said chief executive officer Robert Arnot in a statement. "We believe that the decrease in consumer confidence seen in recent months may result in increased promotional activity."
As of Oct. 31, the company’s order backlog had decreased to a level similar to that reported for June 30, 2002, which was down 47 percent from prior-year levels.
— Dan Burrows
Earl’s Limited Efforts
For spring 2003, Los Angeles-based Earl Jean is rolling out two limited-edition styles of jeans.
The two styles of jeans each bear the brand’s signature "E" embroidered on the back pocket; each pair bears a number from one to 500 — the maximum number of each style the company said it will produce. The jeans are packaged inside floral silk-screened denim bags.The first style, which the company calls "Hurricane Flowers" is inspired by nature. Designed to evoke a bed of flowers after a heavy spring rain, the jeans feature grommet accents and denim flowers strewn about on each leg.
The other style is called "White Lava." This style was inspired by the hot days and cool nights on Waikiki. The line features light washes, lightweight fabrics and vintage Hawaiian floral prints. The look of white lava on the jeans’ legs was created by using ultra-worn gray denim with white stitching.
The "Hurricane Flowers" jeans wholesale at $110 and the "White Lava" at $95.
— Julee Greenberg
Novel Denim Fades to Red
Higher costs and lower sales pushed Novel Denim Holdings Ltd. to red from black in the second quarter of its fiscal year.
For the three months ended Sept. 30, the Hong Kong-based denim, chino and twill manufacturer recorded a net loss of $3.6 million, or 40 cents per diluted share. That compares with last year when the company took profits of $3.6 million, or 39 cents per share.
Net sales for the period dipped 5.6 percent to $37.5 million. Of that, garment sales plunged 40.6 percent to $19.4 million, which was partially offset by a 153 percent jump in third-party fabric revenues to $18 million.
"During the past quarter we concentrated on improving our garment production efficiencies following events earlier in the year, by reallocating resources and reassessing production plans with the expectation of improving profitability within our garment operations," said chief executive officer K.C. Chao in a statement. "While garment production has not returned to expected levels, due primarily to a shortfall in garment shipments during September, we believe we are on the path toward recovery."
Greater efficiency has yet to show up on the bottom line, however, as costs grew markedly during the quarter. Costs of goods rose form 77.9 percent of sales to 87 percent, while selling, general and administrative costs rose from 11.2 percent of sales to 19.5 percent.
Overall, for the first half of the year, Novel reported a net loss of $9.8 million, or $1.07 per diluted share. That compares with last year’s half when the firm posted net earnings of $7.3 million, or 76 cents per share. Sales for the period ticked up 2 percent to $78.5 million.In other news, the company said it has recently opened a 120,000-square-foot garment factory next to its fabric plant in Cape Town, South Africa.
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)