NEW YORK — Phil Marineau has set Levi Strauss & Co.’s sights on the crucial goal of cutting debt and improving profits after pulling the Dockers casual brand off the selling block because no buyers were willing to pay considerably more than the $650 million minimum set by bondholders.
“As we examine our opportunities for growth in late 2005 and beyond, we are going to be looking at the core jeanswear business that we’re in, just getting the right product, the right price, the right fixtures and the right doors,” Marineau, Levi’s president and chief executive officer, said in an interview.
For most of the next year, the company will remain focused on maintaining “a sustainable, strong economic model with reasonably stable sales,” he said. A turnaround of its seven-year sales slide has taken a backseat.
Levi’s also will start looking at ways of getting its brand name into other categories of merchandise “not very far away from jeans,” Marineau said, without offering more specifics. (See related story, page 9.)
From a sales perspective, the San Francisco-based company has fallen a long way. In the fiscal year ended November 2003 — the most recent full year for which data is available — the firm had $4.15 billion in revenue, compared with the $7.1 billion peak reached in 1996. Sales were up 0.8 percent through the nine-month period that ended Aug. 29.
Even with that momentum, which was somewhat diminished by an 8.2 percent slide in the third quarter, Marineau said he wasn’t “making any predictions” as to when Levi’s would break its slump. His interest is boosting margins and paying down debt.
At the end of the quarter, the firm’s long-term debt was $2 billion, $100 million less than it had been at the start of the year. Levi’s executives said they plan to continue paying down the debt, but offered no specific targets.
One of the firm’s major reasons for seeking a buyer for Dockers, which it put on the market in May and pulled on Oct. 18, was to pay off that debt, a legacy of the 1985 leveraged buyout the controlling Haas family used to take the company public. Levi’s bondholders had signed off on the potential sale so long as it paid off at least one-third of the company’s long-term debt. However, according to bond analysts who asked not to be identified, company officials had expected the sale to bring in $800 million to $900 million, more than the minimum amount.
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