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Levi Strauss will limit items for holiday shopping season

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Limiting selection should mitigate tariff costs, protect

margins

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Strategy has been used by other brands including Hasbro ( HAS ),

Nike ( NKE )

By Arriana McLymore and Anuja Bharat Mistry

NEW YORK, July 11 (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 ( HAS ) are also

cutting less-popular lines. That approach has been used before

in difficult times such as the pandemic, by Nike ( NKE ) 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 ( NKE ) 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 ( HAS ) 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 ( HAS ) 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 ( AMZN ) 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 ( UL ) Tatcha and

Procter & Gamble's ( PG ) Ouai, said some of its clients reduced the

number of products offered for Amazon's ( AMZN ) 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 ( AMZN ), 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.