Levis finds jeans genie in Wal-Mart

Levi Strauss, the iconic jeans-maker, reported a sharp increase in quarterly profits yesterday and said that a plan to reverse years of declining sales had begun to take hold.

The San Francisco-based company posted pre-tax profits of $44.7m (£27m) for the third quarter, up from $27.4m a year ago.

Chief executive Phil Marineau put the improvement down to the introduction of the company's low cost brand, Levi Strauss Signature, into the world's largest retailer Wal-Mart, as well as strength in the Asia Pacific region. Sales in the Americas rose by 9.4% to $748.6m.

But Mr Marineau said the company still faces "substantial problems" in Europe where sales fell by 4.6% to $243m. Management in Europe has been changed and a new fit for the core 501 jeans is being launched with the first advertising campaign for the brand in six years.

Revenues for the full year are expected to be flat on last year's $4.1bn with a return to modest growth forecast for 2004. Sales at Levi peaked at $7.1bn in 1996, shortly after the introduction of the company's Dockers brand of casual clothing, but have fallen steadily since.

The company is under pressure at both ends of the market. Discounters are putting pressure on prices while top-of-the-range jeans such as Diesel, Paper Denim Cloth and Seven are increasingly popular.

In July, Levi responded by launching the discount Signature line, which sell for about $23, in 3,000 Wal-Marts. They will be launched in Europe next year. It has launched the Type 1 premium brand in upmarket department stores.

Mr Marineau said he was encouraged that the introduction of Signature had not appeared to cannibalise the core "red tab" brand. "We are segmenting the market to reach a much broader range of consumers."

The company has been going through a tough restructuring and last week said it would close its remaining American plants, cutting another 2,000 jobs. The restructuring is aimed at making the company more responsive to consumer trends. It hopes to reduce the time it takes to get a product from design to shop shelves from 15 months to as little as three months.

The company said debts of $2.4bn would start falling in the fourth quarter.