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What to Watch: Levi’s Big Bet

Next year is going to be quite telling for Levi Strauss &Co.Executives at the San Francisco-based jeanswear giant contend that 2003 will bring an end to their streak of sales declines and there ’s one major event that could make that...

Next year is going to be quite telling for Levi Strauss &Co.Executives at the San Francisco-based jeanswear giant contend that 2003 will bring an end to their streak of sales declines and there ’s one major event that could make that happen.

This story first appeared in the December 26, 2002 issue of WWD.  Subscribe Today.

After more than a year of negotiations,in July the Levi Strauss Signature line will bow at Wal-Mart Stores ’more than 2,800 U.S.units,marking the brand ’s first appearance in the mass market.

Levi ’s officials insist that is not the reason they ’re expecting their long-awaited turn- around.Since Phil Marineau joined as president and chief executive officer in 1999 with the mission of stopping the sales declines,that ’s been the company ’s key goal.In addition to improving operations and delivery rates,a key piece of the plan is Levi ’s “consumer seg- mentation “strategy,which it contends will allow it to sell jeans ranging from $25 to $250 by testing fashion-forward ideas and quickly knocking off its own hits.

But the numbers suggest that a lot is riding on Wal-Mart.Marineau has said he believes Levi ’s could sell “hundreds of millions “of ollars worth of Levi Strauss Signature jeans a year,and market observers suggest Levi ’s could easily turn Wal-Mart into a billion-dollar account.

Levi ’s executives have said they expect sales next year to rise by 2 to 5 percent. Presuming that fourth-quarter results come in at the flat level expected (Levi ’s fiscal year ended last month,but numbers won ’t be released until January),the company is expecting 2003 sales to rise in the range of $80 million to $200 million from the roughly $4.1 billion the firm is expected to report for this year.

The gap between the expected Wal-Mart volume and projected increase could mean that Levi ’s sales could rise next year even if its core business continues to shrink.

Levi ’s sales are far off the peak level of $6.7 billion reached in 1995 and observers agreed that jumping into Wal-Mart could be the aggressive step the company needs to make up for lost volume.But the question they pose is whether Levi ’s entry into the mass chan- nel will cost it sales at the national chains and moderate-priced department stores that cur- rently sell the bulk of its goods.

Levi ’s officials contend that the distinct brand imagery of Levi Strauss Signature jeans, which lack the two-horse patch,red tab and distinctive pocket stitching that are Levi ’s hall- mark,will keep the mass brand separate from the higher-end product in consumers ’minds. Whether they ’re right about that is a question that remains to be answered.