e’ll start to see stable sales that are equal year-to-year.”
He added the firm’s sales might start to grow again in 2003. In February 2000, a few months after he joined the firm from Pepsi, Marineau had said “We see growth coming back in the year 2001.”
Still, in an interview and a conference call with financial analysts Wednesday, he maintained that he is satisfied with Levi’s results, given the current “very uncertain” retail environment.
“I’m very pleased and encouraged with the results we were able to deliver in the fourth quarter,” he added. “We hit the targets we set for ourselves on our last conference call and slowed our rate of sales decline.”
Fourth-quarter net income was $63 million, down 16.5 percent from the prior year. Sales slid 4 percent to $1.23 billion. In keeping with the company’s recent pattern, the biggest slide came in the Americas region, where sales fell 8 percent to $821.9 million. Asian sales, due to weakness in the Japanese market, were down 2.7 percent to $103.1 million while European sales rose 7.9 percent to $309.8 million.
Excluding the effects of currency fluctuations, Asian sales would have risen 6.3 percent and European sales would have been up 4.4 percent.
Levi’s European division, which developed the Engineered Jeans style, has been the company’s best-performing unit for some time now. Last summer, the company transferred its president, Robert Hanson, to the San Francisco headquarters, where he now heads up the Levi’s brand in the U.S.
Last week, Hanson said he was dropping the TBWA/Chiat/Day as Levi’s ad agency and hiring Bartle Bogle Hegarty, which already does its European ads, as its worldwide agency.
“While I believe you must keep the decision-making close to the market that you’re selling, it makes sense for us to brand globally,” Hanson said in an interview.
Marineau added that the company plans next month to introduce in Europe Red Tab jeans priced at about $35 to $44,, well under the brand’s current opening price point in that region, “to attract more customers.”
“That will continue to fuel growth,” the ceo said. “Around the world, we’re making sure we have the opportunity to sell at the right price point, from the $250 level to the $25 level. That’s a unique opportunity for the Levi’s brand, and it’s one we’ll continue to explore as we move forward.”
In the U.S., the company during the fourth quarter for the first time backed a price-promotional campaign on its Levi’s and Dockers brands that met with “great success,” he added.
“We’re very encouraged by the results, the consumer takeaway that we had with these advertised price reductions,” Marineau said.
He said the promotions allowed Levi’s to stop its decline in U.S. unit volume in the fourth quarter, though the price reductions allowed revenue to continue to slump. The campaign lowered Levi’s minimum advertised prices from $29.99 to between $24.99 and $27.99 for brief periods.
“The level of support on the part of the retailers — Penney’s, Kohl’s, Sears — how they promoted from that standpoint was significant,” Marineau said. “It was a well-calculated thing.”
Marineau added that the planned discounts allowed the company to continue to stay out of the heavy markdown fray that characterized the last few weeks of holiday selling. Levi’s has traditionally not participated in margin-maintenance programs with retailers, which in the end comes down to paying back stores because they marked goods down heavily.
But it remains to be seen if Levi’s will take the next big step in discounting and open relations with Wal-Mart or one of its rivals. Observers have speculated that, if Levi’s does so, it will likely offer a sub-brand that identifies itself as “by the makers of Levi Strauss” rather than mainline Levi’s product. That’s the approach the company took with its former Britannia brand in Kmart in the mid-Nineties. Today, Britannia is owned by VF Corp., Levi’s largest rival in the jeans business.
Isaac Lagnado, president of the Tacital Retail Solutions consulting company in New York, said, “The Wal-Mart thing is going to be intriguing. I think they may do a different line by Levi’s, not the full-branded department store product. But nevertheless, they’re talking about selling in Nordstrom now. I’m not sure Nordstrom is going to get terribly behind a product that’s being put in the circular at Wal-Mart. On the other hand, it would solve some of their top-line problems.”
Were Levi’s to take on the Wal-Mart business, it would be going head to head with VF Corp., which along with the private label brand Faded Glory, supplies the bulk of Wal-Mart’s jeans assortment. Other major brands Wal-Mart carries, many of which are exclusive to the chain, are the Kathie Lee Collection, White Stag, Catalina and Jerzees.
Angelo LaGrega, president of mass market jeanswear at VF Corp., expressed little concern about going head-to-head with Levi’s.
“Whatever they decide to do, that is out of our control. What we do have control of is how we market our brands,” he said. “We compete with a lot of people within our channel and outside our channel. Most of our customers cross-shop anyway.”
Levi’s also warned that it’s in talks with its unions in the U.S. and Europe about closing more plants. Chief financial officer Bill Chiasson said in the conference call that Levi’s hasn’t yet determined what domestic facilities might be vulnerable, but said the company has singled out two Scottish facilities as targets for closure.
Levi’s has eight U.S. facilities left, with 4,400 employees. Marineau said he expected to complete talks with the unions by about the end of the first quarter, on Feb. 28. Officials at UNITE could not be reached by press time.
“We wanted to make sure that we are able to have public discussions with our unions and employees about these plant closures, because obviously this is a very painful process,” he said. “We want to give them all the consideration in this process we can.”