Levi Strauss to Close 6 Plants, Cut Staff

Levi Strauss & Co., an apparel icon suffering declining sales for the last five years, said Monday it will close six U.S. plants and dismiss 3,300 workers this year as it halts almost all of its U.S. manufacturing operations.

San Francisco-based Levi said the closures will help the company “maintain strong margins” and invest more of its resources in product development, marketing and retail initiatives.

“We are in the midst of a business turnaround, but this is a shift that would be happening regardless of sales,” spokeswoman Linda Butler said.

Levi is one of a growing number of apparel companies that have chosen to move manufacturing outside the U.S. to cut costs over the last five years. Between 70% and 80% of all clothing purchased here is sewn outside the U.S., industry experts say.

“What’s driving all this is American consumers’ demand for affordable clothing,” said Erik Autor, vice president of the National Retail Federation’s International Trade Counsel. “There’s a tremendous amount of price pressure on retailers to give their customers the best value they can on clothing. That ripples down the supply chain to apparel and fabric manufacturers, yarn spinners and fiber producers.”

For Levi, the announcement is part of a major restructuring that began in 1999. After a few earlier closures, the company began shuttering manufacturing sites in earnest in 1999 when it closed 10 plants in the U.S. and others in Europe and Canada.

The closures will not reduce overall production, Levi said.

The privately held firm, which also makes the Dockers brand, has been struggling against fierce competition in recent years as competing denim brands became less expensive or more fashionable, analysts say.

Although Levi is the nation’s largest-selling jeans brand, the company’s sales had fallen to $4.3 billion last year from $6.9billion in 1997, a 38% drop.

While the jeans are popular with adults, they’ve lost cachet with trend conscious teens, apparel experts say.

“It’s common knowledge that Levi has not connected well with teens for quite a few years,” said analyst Thomas Lewis of C.L. King & Associates.

It is not clear yet how much the shift will help Levi solve slipping sales. But analysts say it is a wise move for a company that historically has been considered one of the most all-American brands.

“The broad industry trend is away from manufacturing and [toward] a more product and marketing focus, regardless of the source of the product,” said Stephen Lamar, senior vice president of the American Apparel & Footwear Assn.

Denim sales represent 75% of Levi’s business. Overall demand for denim has remained stable in recent years but prices have dropped, which means companies must manufacture less expensively to maintain or increase market share, apparel experts say.

“The unit sales were big, the dollar sales were relatively flat [last year compared with 2000],” said Marshal Cohen, president of NPD Fashion World, which tracks industry sales. In fact, NPD said, apparel didn’t grow last year in dollar sales. Cohen said he thinks Levi is moving in “an excellent direction,” and also has introduced more stylish products.

“Their business is not all doom and gloom,” he said. “They just need to find new ways to compete in a highly priced competitive market.”

The Levi plant closures include a San Francisco plant that employs about 100 workers.

Most of the sites are in Southern states--Texas, Georgia and Tennessee.

Employees were notified Monday morning about what Levi called a “painful but necessary business decision.”

The plants will close in three phases beginning in June. Levi will have only two manufacturing sites left in the U.S., a sewing plant and a finishing center in San Antonio.

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Levi Cutoffs

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