LEVI'S SCALEDOWN AFTER INDIA RETAIL RUSH.
MUMBAI -- American denim giant Levi Strauss and Co is unwinding its aggressive India retail expansion, shuttering unviable stores and axing some jobs, as part of a restructuring plan to boost profits. Levi's, Reebok and Benetton have been the most ambitious foreign fashion brands, placing big bets on the India growth story.
The fully-owned Indian subsidiary of the San Francisco-based company is closing down the flagship large stores Levi's Square - located on some of India's busiest shopping streets - and halting expansion of the low-cost jeans brand Denizen, said multiple sources familiar with the development. In the past decade, Levi's built a distribution strategy resembling an FMCG model - with multiple brands pushing market penetration, including EMI schemes for an expensive pair of jeans - fuelling a hunt for more retailing space. The low-cost brand Denizen buoyed the expansion plans as the denim major made a big push into emerging markets like India, China, Brazil and Russia.
But slowing economies and profitability concerns have prompted the $4.8-billion Levi's to embark on a restructuring, which has roiled India plans to an extent. This would also mean the company will stay focused on its core denim appeal and cut back on other merchandise, which had expanded in India tracking the retail boom, said one of the sources mentioned earlier.
"Like all retailers, we continually evaluate our store portfolio to ensure we have the right stores in the right locations and to best serve the needs of our consumers. This is a routine part of doing business. In India, we have more than 400 stores which are operated through a network of franchisee partners. As part of our regular business management processes, we constantly monitor, manage and evaluate our store portfolio in consultation with our franchisee partners," said a Levi Strauss spokesperson for Asia-Pacific.
She declined to comment on rumours or speculation about the company pulling out the Denizen brand from India. Industry sources said the company had brought Denizen operations in India to a standstill and not booked merchandise for the coming season. The move could be part of a downsizing in Asia-Pacific where the company reported a surprise loss. Over the years, the denim maker has withdrawn several brands like Dockers, Sykes and Signature from the Indian market.
"They have been shutting down the large format stores as fixed costs for such stores are huge. For a brand like Levi's, which primarily retails denims, it is difficult to get such large stores to perform unlike a brand which has a lot more variety. They expanded at a time when the slowdown had started impacting consumers. So, strategically, it was not the best time," said Harminder Sahni, founder and MD of Wazir Advisors, a retail consultancy.
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|Publication:||Pakistan & Gulf Economist|
|Date:||Sep 16, 2012|
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