Levi India tapers vendor base

Feb 03 2014, 00:58 IST
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In a competitive market, Levi Strauss wasn’t able to draw customers and was compelled to cut its losses. In a competitive market, Levi Strauss wasn’t able to draw customers and was compelled to cut its losses.
SummaryIt’s been close to two decades now but Levi Strauss India can’t seem to get the right fit.

It’s been close to two decades now but Levi Strauss India can’t seem to get the right fit. The apparel maker is watching its bottom line — losses in FY13 came in at Rs 161.7 crore — and is letting go of stores and vendors. In a big overhaul over the last 18 months, the iconic brand has shed more than 100 vendors with the base down to just 30, and 40 unviable outlets have also been shut.

“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 wasn’t 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, Levi’s, which slugs it out with brands like Lee and Wrangler, hasn’t 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 isn’t 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 Levi’s 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 company’s general manager Shiva Prasad.

The US multinational acknowledged the weakness

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