Trying for turnaround: Ailing Levi Strauss refits U.S. strategy

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Levi Strauss & Co., sweating over a sales plunge of nearly $2.9 billion over the last five years, is stitching together a new fashion strategy for fall.

Among its moves: an edgier ad approach, innovative new denim products, better-fitting jeans and a major push for women's jeans, an area growing more rapidly in sales than men's.

"Now that we've got the product right, we can communicate that to rebuild the brand icon," said Robert Hanson, Levi's brand president who took over the jeans brand in the U.S. less than a year ago. Levi Strauss' sales in the year ended Nov. 25, 2001 were $4.3 billion, a big slide from $7.1 billion in 1996. For the six months ended May 26, it lost $37.4 million as sales fell another 9% to $1.9 billion.

Mr. Hanson said Levi's also is coming to grips with its long-running distribution and inventory problems. "We are upgrading the way Levi's sells to people at retail," he said, adding customers will see the new styles "and not dig through cubbyholes" only to find their size is missing.

In his previous job, Mr. Hanson was credited with the revival of the Levi's brand in Europe, riding on Engineered jeans, a product with curvy seams. But that did not catch on in the U.S. Now, he's rolling out the Type One jean, dark denim with bright, colorful stitching.

coming litany

In what is the first of what is expected to be a coming litany of product-based ads, Levi's new agency, Bcom3 Group-backed Bartle Bogle Hegarty, created new work, a magazine campaign for low-cut jeans for men and women, headlined "Dangerously low."

A TV effort will be released later this summer, also playing up the "low" concept. Levi Strauss, which abruptly dismissed its agency of four years, Omnicom Group's TBWA/ Chiat/Day, San Francisco, traditionally had prided itself on a more wholesome approach to advertising. Mr. Hanson said the target is women and both men and women under 25, but the work will appeal to "all Americans" by "celebrating their spirit of youthfulness" rather than focusing solely on a youth audience.

Mr. Hanson also indicated that Levi's wants to take a lead in marketing innovation with tie-ins with music sponsorships, hoping to restore the luster of its Red Tab label.

If Levi Strauss makes any new major distribution moves, such as selling in Wal Mart Stores, it's likely to develop a new label. "If we were to engage in a mass channel, it would be under a new brand," he said, adding "it's too early to speculate and no decisions" have been made.

Levi Strauss last year spent $11.5 million on U.S. advertising for its jeans brands, and $3.5 million for the first four months of this year, according to Taylor Nelson Sofres' CMR. But its ad outlays have been steadily shrinking. According to documents filed with the Securities and Exchange Commission, Levi Strauss spent 9.5% of its then-larger sales total on global advertising and promotion in 1999. That dropped to 8.7% in 2000, 8.4% last year and will be about 8% this year, the documents show.

Mr. Hanson, with the company since 1988 and a former executive at Interpublic Group of Cos.' Foote, Cone & Belding Worldwide on the Dockers' brand, has expertise that apparently goes beyond the company's ad and product scene and is up to the challenge of a corporate culture mired in a tradition as steadfast as its venerable blues, according to some executives familiar with Levi Strauss. "If anybody can turn that company around, he'll be the one," said one of those executives.

hard look

Retail consultants such as Helen Bulwik, principal, Seagate International, an Oakland, Calif., firm, credits Levi Strauss, in the midst of closing factories and facing millions of dollars in charges as a result, for taking a "strong and hard look at the market," and getting the fit right for the upcoming season.

Still, Harry Bernard, exec VP-chief marketing officer for retail consultant Colton Bernard cautions that Levi Strauss' challenge is formidable. In addition to designer, retail private-label and boutique brands, competitor VF Corp. "is the poster child for perfection in replenishment, market assortment and being able to make money."

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