Levi's profit plunges 98 per cent as young shun its jeans
Thursday 10 July 2008
Levi Strauss's second-quarter net income plunged 98 per cent because of weak sales of Dockers and Levi's. The company – which began making its famous jeans in San Francisco in 1853 and which is one of the world's largest brand names in clothing – is considering moving its headquarters and all 1,000 employees across the Bay Bridge to Oakland to save money.
Levi Strauss is not the only clothing company in dire financial trouble. Steve & Barry's, the fast growing discount fashion retailer which is much loved by Sarah Jessica Parker, is expected to file for bankruptcy protection.
The collapse of Steve & Barry's will send shock waves through struggling shopping malls across America, which pumped hundreds of millions of dollars into luring the company into cavernous, empty spaces, some as large as 100,000 sq ft. All of those 275 shops may now close and the company's 16,000 employees are expected to be sacked. Anticipating a Chapter 11 bankruptcy proceeding, some vendors have halted shipments to the company.
Levi, which has a presence in more than 110 countries, has suffered through several years of declining sales as younger consumers gravitate to new brands. Wal-Mart's decision to cut back on Levi's inventory as it tries to shore up its own declining sales has also hurt.
The company reported revenue of $936m to 25 May, with $1.001bn in the year-earlier quarter. There were revenue increases in Europe and Asia Pacific but they only partly offset weak US sales. Net income fell from $46m to $1m.
In a conference call with reporters, Levi officials blamed computer software for causing a temporary block on orders being shipped to retail customers for a week. A number of retail customers have also cancelled orders, the officials said.
Levi's chief executive, John Anderson, expects US economic conditions to remain tough in the second quarter. Levi expects the rest of the year to be challenging, he said, "given the slowing macroeconomic indicators we are seeing globally."
Sales of the iconic brand topped out at $7.1bn in 1996, after which Levi went through an eight-year sales slide. The company is privately owned but has publicly traded bonds and therefore reports its earnings.
Mr Anderson took over in 2006 and has promised to make Levi more competitive and responsive to fashion trends.
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