Levi's New Low-Riders

Levi Strauss & Co. (San Francisco) has unveiled a new discount clothing line, called Signature, that will be sold by Wal-Mart Stores next year.

It is the reversal of a long-standing policy by the venerable jeans maker not to sell its brand in discount outlets. But, as the company noted, today's shoppers buy nearly one-third of their clothes at Wal-Mart, Target and other discounters, a trend that has forced the company to expand beyond the department store business that has generated most of its sales. Levi's said it hopes to eventually sell the Signature line in other discounters besides Wal-Mart.

“We want to sell our clothes in places where people want to shop,” said Levi's ceo Phil Marineau.

Levi's previous refusal to sell its jeans in discount chains has contributed to six years of steadily declining sales. The company's sales this year will total about $4 billion, down from a peak of $7.1 billion in 1996.

The new Signature jeans, which will be available in Wal-Mart in July 2003, probably will sell for $23 to $26, Marineau said. That's about 15 percent to 35 percent less than the typical $30 to $35 price for Levi's most popular basic jeans.

Levi's also plans to sell discount corduroy pants, shirts and jackets under the Signature brand, the company's first new clothing line since the 1996 launch of Slates slacks. Slates has since been folded into the company's Dockers brand.

“If they didn't make this move, Levi's would be dead in three years,” said Kurt Barnard, president of Barnard's Retail Trend Report (Upper Montclair, N.J.). “This could be their salvation.”

It's not without risks, however. Some are questioning whether Levi's will be able to deliver the high volumes of low-cost clothes needed to stock Wal-Mart's 3000 stores. During its slump, Levi's has been plagued by high manufacturing costs and delivery problems. Levi's also risks tarnishing the reputation of its higher-priced jeans, some of which sell for more than $200 a pair in fashionable retailers like Barney's New York. And, by hooking up with Wal-Mart, Levi's threatens to alienate long-time business partners like Sears and J.C. Penney.

But those worries shouldn't matter to Levi's, Barnard insisted. “If the department stores had been delivering enough sales to Levi's, they wouldn't have to go into Wal-Mart.”

For Bentonville, Ark.-based Wal-Mart, Levi's Signature line will be a premium brand. Most Wal-Mart jeans sell for under $20, with some prices falling below $10.