Levi's 501 jeans going upmarket

Enlarge Photo A man walks past a Levi's shop in Riyadh, in this December 14, 2003 file...

Levi Strauss & Co is launching an updated line of its 501 jeans with higher prices to match, as the U.S. apparel maker seeks to increase sales despite the tough domestic economy.

John Anderson, chief executive of the privately held company, said in an interview on Monday that current fashion and economic trends supported the launch during the second half of 2008, in time for the back-to-school season.

Anderson said Levi is launching the new jeans in all 110 countries where its clothes are sold. There will be better fabric and finishes ranging from untreated jeans that are dark and stiff, to lighter jeans that are softer and more worn-in.

"We think it's going to be a challenging year, and what a great time to step up as a market leader (with) a global message," Anderson said. He added that the straight leg and slim fit of the 501 jeans was in fashion now.

Levi is also pushing premium jeans, shirts and jackets and clothes for women, as part of its growth strategy.

"Our experience tells us that when times get tough (people) go to the brands they know and trust," Anderson said.

The San Francisco-based company introduced the world's first pair of jeans in 1873.

"We haven't had a global launch like this in the last 10 years," Anderson said, but declined to provide details on the launch's cost, beyond calling it a "significant amount."

He said he is not worried that it coincides with a weak U.S. economy, which is teetering on recession as consumers spend less amid higher food and fuel costs, lower home values and resetting mortgage rates.

"As long as you bring innovation to the marketplace, I think the consumer will purchase," Anderson said.

HIGHER PRICES

Whereas the bulk of its jeans have historically sold for $25-$35, Anderson said the new jeans will be in the $30-$60 range, although the cheaper ones will still be available.

Levi Strauss, which had 2007 net revenue of $4.36 billion, has not seen its original Levi's business impacted by the economy, Anderson said, though there has been a slowdown in sales of casual pants, like those offered through its Dockers San Francisco brand.

Anderson said the company believes that in a weak economy men were putting themselves and their needs last after those of their wives and children.

"We feel it's tough, there's no question on that. We think it's going to be a month-by-month battle," Anderson said of the economy. But growth opportunities such as emerging markets would help it get by, he said.

Anderson said about 45 percent of the company's sales currently come from international markets, such as India and China, where it is the No. 1 jeans brand.

But as Levi launches products like the new 501s, and expands its Dockers San Francisco line in more countries, Anderson said he sees the percentage of international sales rising to about 60 percent.

"There is no doubt that in three to five years we will be stronger internationally than we are in the U.S.," Anderson said. "The U.S. will continue to grow, it's just that the international business will grow faster."

Anderson said Levi's international business was getting a boost from the strength of other currencies versus the U.S. dollar. The weak dollar, which boosts the value of foreign sales when converted to U.S. currency, aided international sales by a "single-digit percentage rate" last year, and would do about the same this year, Anderson said.

Other important markets include Russia, Turkey, the Middle East, Indonesia and Brazil, Anderson said, adding they were more insulated from the U.S. economic malaise than previously.

"I think Europe now is strong enough on its own and clearly Asia is strong enough on its own," Anderson said. "Will people be concerned about what happens in the U.S.? Absolutely. But I don't think the U.S. can dramatically impact global economies to the extent it used to."

In addition to sales through department stores and other retailers, Levi has more than 70 of its own stores in North America and 1,500 Levi-branded stores worldwide.

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