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Why Americans won't pay up for jeans anymore

Daily Ticker

Remember Pan Am airlines or Blockbuster Video? They were pre-eminent brands that failed to adjust to a fast-changing economy and went under after years of being in business.

Chip Bergh, president and CEO of Levi's, is determined to make sure that doesn't happen to Levi's, the U.S.-based jeans company founded more than 140 years ago.

"Levi's is one of the most amazing brands in the world," says Bergh. "We were bigger than Nike in 1995" but "then we went backwards."

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Levi's revenues are now about one sixth of Nike's (NKE) but they're growing. And Bergh is intent on driving them higher.

"The idea is to demonstrate that we can post positive profitable sustained growth year in and year out consistently, because that's what good companies do," Bergh tells The Daily Ticker.

And in order to do that, he's focusing on adjusting to consumer behavior here and abroad (the company operates in 110 countries around the world).

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In the U.S., consumers "are much more value-oriented ... much more deal-sensitive, which plays to our favor because one of our strongest equities is quality and value for money," says Bergh. "Levi's are going to last a long time."

That consumer attitude also means Levi's must be "price competitive" at retailers such as Macy's (M), Sears (SHLD), J.C. Penney (JCP) and Kohl's (KSS).

The U.S. is among Levi's five core markets, the others being Canada, the U.K., Germany and Mexico. But the company's biggest growth opportunities lie elsewhere, with the BRIC countries  Brazil, Russia, India and China, says Bergh.

Although those emerging economies are slowing  and losing the interest of many global investors  Bergh sees lots of potential there, and not necessarily because of price.

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The cheapest pair of jeans Levi's sells in China costs $100 a pair. "We sell premium denim in China and it's a very fashion-oriented consumer, a very aspirational brand in China," says Bergh.

In contrast, the typical Levi's women's jeans in the U.S. sell for around $50-$78 a pair, according to the company's website. But the company's premium product in the U.S., known as its "made and crafted" label, retails for roughly for $100-$215 a pair.

If all goes well, Levi's could potentially go public in a few years (most of its privately-held shares are owned by relatives of founder Levi Strauss).

"We're not going to do an IPO over the next couple of years," says Bergh, "but over the next three to five years we should be putting the company in a position where the board ... [and] the shareholders" can make that decision.

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