Price rises coupled with low consumer sentiment thus impacted demand in the marketplace resulting in higher inventories. Additional costs had to be incurred on discounting during the end-of-season sale and on consumer promotions to stimulate demand, significantly impacting profitability of the company. Similar trends were observed across all key listed apparel brands, the company said in a filing with the Registrar of Companies.
In a competitive market, Levi Strauss wasnt able to draw customers and was compelled to cut its losses. A director of Levi Strauss India told FE on condition of anonymity, We have been ruthless in closing unprofitable stores and cutting down on our vendors.
Clearly, Levis, which slugs it out with brands like Lee and Wrangler, hasnt been a success is the mass segment and has scrapped its Denizen label; it has also phased out Dockers. As a result, revenues were lower by 34% in FY13 at Rs 485 crore in FY13. In the previous year, revenues had risen 24%.
But the Indian subsidiary of the iconic jeans brand isnt giving up yet. While we have shut 45 unprofitable stores, we have also set up 70 outlets over the past year, the director quoted above said. That leaves the chain with some 400 exclusive stores.
The company said in an emailed reply to FE that it does not share any specific details of stores or financials in the country.
When Levi Strauss entered the Indian market in 1994-95, it was served by just a handful of vendors. Over a period of time, the number of vendors increased since there was more product variety, said Devangshu Dutta of retail consultancy Third Eyesight.
Bangalore-based Prateek Apparels, which started making jeans for Levis eight years ago, supplies roughly 40,000 units a month. Due to a slow market we have seen some dip in demand and last year our monthly sales dropped to 10,000 units, said the companys general manager Shiva Prasad.
The US multinational acknowledged the weakness in the Indian market in its latest annual report. In Asia, revenues declined due to stiff economic headwinds in the key markets of China and India, and the exit of the Denizen brand. Well continue to focus on key emerging markets, focusing on getting our business back on track in China and India, the company said. About 16% of the companys revenues comes in from the Asia-Pacific region, with China forming a large chunk of it, followed by India.
With consumer demand slipping in a sluggish economy, retailers are trying to survive by changing the product mix, right-sizing stores or closing down unviable outlets. Like other foreign brands in India, Levis is positioned as an aspirational brand but may have to change tack to attract value-conscious customers much the way Marks & Spencer has done.