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Levi's CEO to step down by end of year

Levi Strauss & Co. President Phil Marineau will step down as chief executive by the end of the year, concluding a rocky reign.
/ Source: The Associated Press

Levi Strauss & Co. President Phil Marineau will step down as chief executive in November or December, concluding a rocky reign marred by thousands of layoffs and accounting trouble before he finally ended a prolonged sales slide that ravaged the storied jeans maker.

Marineau's planned departure, announced Thursday, gives the tight-knit family that controls Levi's an opportunity to pick a new leader who can build upon more sales momentum and perhaps set the stage for an initial public stock offering to reduce a $2.2 billion debt load.

Levi's has recently acknowledged the company might go public again for the first time since 1985, but Marineau said during a Thursday interview that the possibility of an IPO had nothing to do with his decision to end his seven-year tenure as CEO.

"This just felt like the right time to do it," said Marineau, who will turn 60 in October. He hopes to leave just before Thanksgiving when the company's fiscal year ends, but said he will remain on the job through the end of the year, if asked.

Levi's chairman, Robert Haas, part of the family that descended from the 153-year-old company's founder, said the board of directors will meet in two weeks to begin discussing the next CEO.

The candidates may include veteran Levi's executive John Anderson, who was promoted to president and chief operating officer Thursday in conjunction with Marineau's announcement. Anderson, 55, had already been working closely with Marineau as the head of Levi's Asia Pacific and global supply operations.

Gimme Credit analyst Kim Noland said the next CEO will be inheriting a difficult job.

"It is interesting Phil Marineau is leaving, given the challenges still facing Levi," she said. "After managing to keep the company out of bankruptcy and substantially changing the business model to ensure its survival, I expected him to take some specific steps to reduce debt this year" by selling some assets or pursuing an IPO.

A former marketing wizard in the food and drink industries, Marineau brought an outsider's perspective when he arrived in 1999 to engineer what turned out to be a traumatic makeover.

"It was an extraordinarily challenging assignment," Marineau said. "I had people inside and outside the company who told me that it couldn't be done."

By the time Marineau took the job, Levi's annual sales had already sagged 25 percent from their 1996 peak of $7.1 billion as younger consumers defected to trendier brands and older shoppers began buying less expensive clothes.

The erosion continued until last year when Levi's eked out a 1 percent sales increase, stabilizing the company's annual revenue at $4.1 billion. The company took another step backward to start this year as first-quarter sales sank by 6 percent.

Levi's has jettisoned half its work force since Marineau took over, leaving the company with about 8,500 employees.

The cost-cutting included the closure of Levi's remaining U.S. manufacturing plants as the company joined all the other clothiers who shifted production overseas so they could cater to bargain-minded consumers.

Toward that end, Levi's in 2003 introduced a discount jeans brand called Signature that helped revive sales.

Levi's headaches were compounded in 2004 when the company's auditors scolded management for shaky accounting controls after errors on past tax returns resulted in a series of financial restatements.

Two former Levi's tax managers have been even more critical, alleging the company created illegal tax shelters in foreign countries. Levi's has denied the allegations and countersued the former employees in a case scheduled for an October trial in a San Jose federal court.

Marineau earned $3.36 million last year, according to Securities and Exchange Commission documents. He becomes eligible for a $1.2 million annual pension from Levi's once he turns 65.