By Arriana McLymore and Anuja Bharat Mistry
NEW YORK (Reuters) -Levi Strauss has a simple strategy to deal with U.S. tariffs: stop offering less-popular styles during the holiday shopping season so they can avoid having to offer discounts to move inventory.
The leading maker of jeans and other denim clothes on Thursday lifted its annual profit and revenue forecast, projecting strong demand for new styles and collections including dresses, skirts and wide-legged jeans even as shoppers are economizing due to the climbing prices of most goods.
“We are taking a hard look at productivity in our assortments,” Levi Strauss’ Chief Financial Officer Harmit Singh told Reuters, cutting styles and colors that are not selling, and making way for new product. “And so, we’re reducing our markdowns.”
Other companies including toymaker Hasbro are also cutting less-popular lines. That approach has been used before in difficult times such as the pandemic, by Nike for instance.
Levi Strauss is focusing on a “common assortment” of products, meaning it is producing similar or identical merchandise in various markets, Singh said. This gives Levi Strauss the “flexibility and the agility to move product around the world,” he said.
U.S. President Donald Trump’s tariffs on countries including China, Cambodia, Vietnam and Bangladesh have forced companies to rethink supply chains and import strategies as goods are often subject to layered tariffs. It could cost tens of thousands of dollars more to clear a shipping container of jeans at customs. This will boost retail prices for shoppers, especially during the crucial holiday shopping period.
Levi’s operating margin for the latest quarter rose 7.5% from 1.5% a year earlier. Analysts cheered the company’s decision to tightly control stock-keeping units, or SKUs, an industry term for inventory.
“Levi’s move to reduce non-productive SKUs is a smart and sustainable strategy,” said Angeli Gianchandani, adjunct instructor at New York University’s School of Professional Studies. “Nike pursued a similar strategy through its “fewer, bigger, bolder” approach, which helped simplify assortments … Brands like Coach and Uniqlo have also benefited from editing down to focus on hero products.”
Hasbro said in April that the toymaker was doing a “significant amount of SKU reduction” and importing fewer items from China as a defense against tariffs. Hasbro CEO Christian Cocks said: “We are changing what the SKU mix looks like inside of the aisles for the U.S. so that we can favor India-based SKUs, which maybe are older SKUs but are tried and true.”
Smaller vendors who sell on Amazon are cutting SKUs to offset the impact of paying tariffs and commission fees, and offering sales on discounting events like Black Friday and Cyber Monday, analysts said.
E-commerce marketing consultancy Front Row, which works with beauty and haircare brands including Unilever’s Tatcha and Procter & Gamble’s Ouai, said some of its clients reduced the number of products offered for Amazon’s 98-hour Prime Day.
U.S. retailers drove $7.9 billion during July 8, making the first 24 hours of Prime Day the highest ecommerce shopping day so far this year, according to Adobe Analytics.
“A lot of our brands are considering less SKUs,” Front Row Senior Vice President of Commercial Operations Alexandra Carmody said. “They’re trying to figure out how to optimize the 20% of their assortments that make up 80% of their sales.”
Bogg Bag, which sells $80 plastic totes at Dick’s Sporting Goods and on Amazon, is rolling back the number of items that will be on physical and virtual shelves this U.S. holiday shopping season to focus on the best-selling items, Chief Executive Kim Vaccarella said.
(Reporting by Arriana McLymore in New York City and Anuja Bharat Mistry in Bengaluru; Editing by Sayantani Ghosh and David Gregorio)
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