Levi's Tactics of the Past Reviewed- with outcomes

In the 1980s things began to change for Levi Strauss and company. Growth slowed in the aged 12-24 primary market. Levis decided to expand product lines as sales of 501s declined. They produced corduroy pants and more stylized denim pants for men, women and children. They produced ‘action suits’, blazers, sportswear, and thousand of different articles of clothing for families including maternity wear. At this point they also considered acquisitions as a strategy to provide further growth. In 1979, they acquired Koracorp Industries for $185 million to enhance its women’s wear division. Koracorp included Koret women’s wear, Pyer-Rolnick hats, Oxford men’s suits, and a European based children’s clothing division. Levis also bought Pesitol hats, Rainfair Industrial clothing, Frank Shorter running gear. In addition it established several licensing agreements which allowed the Levis labels to be used on shoes and socks, and with the designers Perry Ellis, Alexander Jullian, and Andre Fezza for a more upscale market segment. Now Levi Strauss was in a position to meet the demand of almost any market need.


Unfortunately the customers did not see it that way. In spite of the diversification and even with a hugely expanded advertising budget which increased to $100 million in 1978, the company’s sales declined every year from 1980 to 1983 with a net income decline of 76%. In 1981, Robert Grohman took over as chief executive officer (CEO), marking the first time the company was led by someone without ties to the Strauss family.

In 1983, Levis began selling in Sears and JCPenney but the net result was not positive beyond the first year. They had simply diversified too much. They no longer had a clear and distinctive identity. The decision was made to focus on core products and to improve retail relationships which had suffered from too little attention and quality issues. Grohman could not turn the company around, and Robert Haas, son of Walter Haas Jr., took control in 1984. In October of 1984, Tom Tusher was named Executive VP and CEO. He nixed a potential deal to expand into Wal-Mart and Kmart in favour of focusing on existing distributors. He directed focus onto preservation of the ‘important values and traditions’. Jeans and corduroys created two thirds of their revenue and thus they were to be re-emphasized. This is an important choice that many companies today are just beginning to imitate. The company was directed to grow from the bottom line through efficiencies, market penetration, and cost savings.

In mid 1985, the LS&Co. lost $114 million. It was taken private through the largest ever leveraged buyout valued at $1.65 billion. Almost immediately, licensing agreements were cancelled with Perry Ellis and Andrew Fezza. Noncore businesses were sold to pay down debt. These included: Rainfair in 1984, Resistol in 1985, and Oxford, Frank Shorter and Koret of North America in 1987. (It should be noted that somehow LS&Co. missed a huge opportunity and trend in the Frank Shorter Company. The man who established this company was an utter icon in the running industry. I believe that if they had any of the talent or vision that Nike demonstrated in this period they could have made this into a multimillion dollar business). In addition, 40 factories were closed and 12,000 employees were let go by 1986. Even with all these changes market forces were against them. Consumer tastes had changed and competition increased. Designers like Calvin Klein, Bill Blass, and Gloria Vanderbilt usurped Levis place as the fashion icons. Levis had not kept pace with the consumer demands and missed the trends toward bleached, faded or ‘washed’ denim.
 
The article posted below indicates that Levi's has decided to reattempt these previously failed tactics in diversification. Will it work? Never say never but.....................