Newspaper article THE JOURNAL RECORD

Wal-Mart, Levi Strauss Face Showdown over Jeans

Newspaper article THE JOURNAL RECORD

Wal-Mart, Levi Strauss Face Showdown over Jeans

Article excerpt

SAN FRANCISCO _ It was a showdown between the world's biggest branded clothing maker and the world's biggest retailer, and neither side blinked.

Levi Strauss Co. recently cut off the supply of one denim clothing line to Wal-Mart Stores Inc. operation in Canada, and the discount behemoth retaliated by refusing to do business with Levi Strauss at all.

"It's a power play," said Harry Bernard, a San Francisco and New York clothing consultant.

"Wal-Mart is an $80 billion business (in annual sales). Levi is a $6 billion business. I think it's a question of who's a bigger gorilla."

Manufacturers and retailers talk a lot about partnerships. But this battle over what merchandise Levi Strauss was willing to sell and what Wal-Mart would buy illustrates how bruising their dealings can be.

The confrontation was set in motion when Wal-Mart, based in Bentonville, Ark., moved into Canada this year by purchasing 120 discount stores that Woolworth Corp. had operated under the name Woolco.

San Francisco-based Levi Strauss had been providing its orange-tab line of Levi's to Woolco. Wal-Mart's purchase of the stores, though, prompted Levi Strauss Canada to rethink its Woolco sales. It decided to follow Levi Strauss's U.S. policy against selling the Levi's brand to discounters, said Levi spokeswoman Karen Bachmann.

Wal-Mart responded by canceling its business with Britannia, a low-end Levi Strauss brand whose headquarters recently moved to Renton, Wash., from San Francisco, Bachmann said.

Before the feud, sources said, Wal-Mart was buying 1 million to 1.2 million pieces per year of Brittania clothing for the United States and other markets. That works out to $10 million or less in revenue at wholesale for Levi Strauss and little more than $20 million in retail sales for Wal-Mart.

The companies are so huge that giving up these sales will have a negligible impact on their finances, observers said. …

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