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Twentieth-Century Business Archives

Levi Strauss & Co. - Lehman Brothers Collection

Levi Strauss & Co.

List of Deals

In 1850 Levi Strauss' brother-in-law, David Stern, opened a dry-goods store in San Francisco. Strauss joined Stern's venture three years later. Jeans, which would become the staple of the family business, were invented when Strauss, noticing the need for rugged pants for miners, had a tailor sew pants from some sturdy brown canvas he had brought with him on his journey. When his canvas supply was exhausted, Strauss turned to a thick fabric made in the French town of Nimes, known as "serge de Nimes," which would be shortened to denim. The business of Levi Strauss & Co. expanded rapidly following this innovation.

In 1872 Jacob Davis, a tailor in Nevada, offered the company a half interest in the patent on a technique he had invented for strengthening the seams of pants by fastening them with rivets. In return, the company would pay the cost of obtaining a patent. The company took Davis up on his offer, and the following year Levi Strauss was granted a patent on the use of rivets to secure pocket seams, and also on the double-arc stitching found on the back pockets of its pants.

At first, the company had the pants sewn by tailors working individually at home. Soon the demand for the new pants became too great, and the company collected its stitchers together under one roof, in a small factory. In 1877 the Levi Strauss & Co. factory expanded, and the notable features of the company's pants—the dark blue denim, the rivets, the stitching, the guarantee of quality—became further standardized. By 1879 the pants were selling for $1.46 each and had become widely worn in the rough-and-tumble mines and ranches of the West. Levi Strauss & Co. continued to sell other dry goods and boasted sales of $2.4 million in 1880. In 1886 the "Two Horse Brand" leather tag, showing a team of horses trying to pull apart a pair of pants, began to be sewn into the back of the company's "waist-high overalls," the term Levi Strauss preferred to "jeans." In 1890 the company assigned its first lot numbers to its products, and the famous number "501" was assigned to the riveted pants. That same year, the company was formally incorporated and issued 18,000 shares of stock in the company to family members and employees.

In 1912 Levi Strauss & Co. introduced Koveralls playsuits for children. Koveralls were the company's first product that was sold nationwide, helping the company to eventually break out of its regional market. The coming of World War I and the boom in production for the war had little or no impact on the company, as it held no government contracts. However, Levi Strauss & Co. began to falter in the early 1920s, when the price of cotton dropped steeply, allowing competitors from other parts of the country to undercut the company's prices. In 1920 alone, company profits fell by one-third. New management was brought aboard in 1921. As a step toward increasing overall productivity, the assembly-line system was implemented. Throughout this decade, the company found itself relying increasingly on the pants it manufactured, rather than the other dry goods it wholesaled, for the bulk of its profits. By 1929, 70 percent of its profits derived from its sale of jeans.

The company fell into difficult financial straits during the Depression. The country's economic condition hit hard the manual laborers who bought the company's pants, and by 1930 Levi Strauss & Co.'s profits had vanished. The company was unwilling to cut back production by firing workers and so amassed a large backlog of unsold products, and the company was forced to put its employees on a three-day workweek. By 1932 sales had dropped to half their 1929 level. The union movement was beginning to take hold in this decade and was gaining a stronghold in San Francisco. Workers in the Levi Strauss & Co. factory had not joined a union; however, organized labor's insistence that union workers wear union-made clothes sharply limited the company's sales in the heavily unionized San Francisco area. In 1935 the company's employees joined the United Garment Workers with management's acquiescence, thereby avoiding a strike and ending the virtual union boycott of Levi Strauss & Co.'s products. The company benefited from the growth in popularity of Hollywood western movies in the late 1930s, which led to an expansion in the market for its jeans. To capitalize on growing brand identification, the company added the trademarked red "Levi's" tab to the back pocket of its pants in 1936, the first label to be placed on the outside of a piece of clothing. As demand increased, the vast stockpile of jeans accumulated during the Depression became depleted, and the factory returned to normal operation. By 1939 the pants had just begun to be popular outside the world of blue-collar workers; college students in California and Oregon adopted them as a fad.

After the United States entered World War II, the government declared jeans an essential commodity for the war effort, available only to defense workers. This restricted distribution made them an even more coveted item and contributed, in the long run, to the brand's success. In the short run, however, wartime price restrictions cut into the company's profits. By the end of the war, the company was operating five jeans factories. The immediate postwar years brought a significant production shortage, and the company instituted a strict program of allocation, favoring retailers who were long-time customers. Levi Strauss & Co.'s profits surpassed $1 million by 1948.

The company underwent the most significant transitions in its history in the 1950s. Taking advantage of demographic trends, Levi Strauss & Co. began to focus its marketing efforts on young people, members of the "baby boom," who would wear its pants, then known colloquially as "Levi's," for play, not work. In the early part of the decade, the company closed down its business wholesaling others' merchandise. Hollywood again helped to boost the company's sales when Marlon Brando and James Dean appeared in movies personifying youthful rebellion and wearing jeans. The pants were losing their status as a symbol of the rugged frontier and becoming instead a symbol of defiance toward the adult world. In 1954 the company branched out into the sportswear business, launching Lighter Blues, a line of casual slacks for men. The following year, the company added jeans with zipper flies.

In 1960 Levi Strauss & Co. introduced pre-shrunk denim jeans in response to eastern customers who were uncomfortable with shrinking pants. Three years later the company added stretch denim and corduroy to its product line. Levi Strauss & Co. profited from movements in U.S. society through the 1960s, such as campus rebellions and the counter-culture, in which jeans became a uniform. By 1968 the company was one of the six largest clothing manufacturers in the country, and sales were nearly $200 million. In 1971 the company's long-standing status as a wholly family- and employee-owned enterprise came to an end when the company sold stock to the public for the first time. At that time, Levi Strauss & Co.'s heavily centralized structure had become inadequate, and operations were broken into four divisions: jeans, Levi's for women, boys' wear, and men's sportswear.

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