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    MARKET EDGES

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Levi Strauss is launching Levi's Underwear for men in JC Penney and Urban Outfitters in October - which I think is a material move with negative implications for Warnaco, and to a lesser extent Gildan and Hanesbrands. Here's why...
  • 1) This is not a typical tighty-whity knock off product. It appears to target an 18-35-year old male willing to drop $12 on a pair of skivvies. This is right in line with CK Underwear's sweet spot.
  • 2) Let's not underestimate the sheer size and marketing power of Levi's. This company is private, so naturally no one knows (or seems to care) how big it is. But at $4.4bn in revenue and a 15% operating margin, it is roughly the same size as Warnaco, Gildan and Hanesbrands combined. My point here is that its marketing budget is 1.5x Warnaco's total EBIT. If Levi's wants to take share - it will take share.
  • 3) There's not that much share to go around. The chart to the right shows that 50% of the market is locked down by four brands. But when we take out lower priced basics, that concentration goes closer to 80%. That's where Levi's is headed.