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Mon, May 05, 2003 - Page 12 News List

American jeans icon struggling

COOL STATEMENT On the eve of its 150th anniversary, Levi's is battling allegations of accounting irregularities and swiftly declining sales

REUTERS , SAN FRANCISCO

Levi Strauss, the company that invented blue jeans, turns 150 years old this month as it fights to recharge a legendary brand that has stood for everything from hard labor to trendy fashion and from rebellious protest to a durable symbol of American culture.

Levi Strauss is marking the anniversary with an exhibition at its San Francisco headquarters showcasing the history of the privately held company that got its start selling supplies to prospectors who flocked to California during the Gold Rush.

But the company's huge successes over the years have been tempered by years of slumping sales and a lawsuit filed recently by two former executives, who charge they were fired for refusing to go along with alleged fraudulent accounting practices that inflated earnings since 1997.

Levi Strauss calls the charges "false."

Financial and marketing analysts say the problems could be distracting for a company that has vowed to boost revenues by between two and five percent this year while fighting to regain market share lost to more youth-oriented brands such as Diesel.

"It is terribly ironic all of this is happening at the 150th anniversary, when it should have been a promotional coup,"said Harry Bernard, a marketing expert who has followed the company for more than 20 years.

The company was founded in 1853 by Levi Strauss, a 24-year-old Bavarian immigrant. Twenty years later, he stitched the first pair of blue jeans and, in doing so, created a pair of denim work pants for the cowboys of the American West which over time became an international symbol of cool.

American troops fighting in World War II introduced Levis to Europe and Asia. And in 1950s Hollywood movies like "The Wild One" and "Rebel Without a Cause," Marlon Brando and James Dean made jeans a statement of rebellion -- a message that resonated through the 1960s.

"How many brands are there that are 150 years old?" asked Steve Persky, manager of Los Angeles-based hedge fund Dalton Investments, which recently bought Levi Strauss bonds. "Levis is almost the generic word for jeans."

Yet that, critics have charged, has been precisely the problem -- in the last decade Levis became the uninspired alternative for a younger generation of shoppers.

In response, Levis has rolled out its popular SuperLow jeans, featuring tummy-baring waistlines, and a new Type 1 jean that highlights the brand's famous orange stitching and red tab.

The company has also outfitted musicians like the popular rock band The Strokes and many other celebrities in Levi Strauss clothing as a way to appeal to younger consumers.

But the lawsuit filed in April by two former executives paints a picture of a company that used financial trickery, including allegedly calculating unusable foreign tax credits as income, to show its turnaround plan was on track to improve market share, lift sales and pay down its some US$2.56 billion in debt.

Company officials have denied the charges.

Even so, news of the lawsuit sent Levi Strauss' bond prices tumbling.

More pressing, analysts say, is for the company to successfully introduce a new lower-priced line of jeans to be sold at Wal-Mart Stores -- its first foray into the discount market and one that will require Levi Strauss to show better supply-chain management than it has in the past.

Most analysts also agree that the turnaround plan begun in 1999 under Chief Executive Officer Phil Marineau appears generally on track, although the tough market for retail sales could make it difficult to meet the sales targets the company has set.

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