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SAN FRANCISCO — Levi Strauss & Co. said Thursday the cost of closing eight manufacturing plants and offering discounts to merchants saddled the jeans maker with a second-quarter loss of $81 million, marking the first time the company has lost money in three years. 

The loss stemmed largely from a $150 million charge taken to cover severance pay and other expenses incurred in the closure of six U.S. plants and two plants in Scotland. The second-quarter loss contrasted with a $43.4 million profit at the same time last year. If not for the special charges, Levi’s said it would have earned $15 million in its latest quarter. 

San Francisco-based Levi’s cut into its revenue during the three months ending May 26 by lowering the wholesale prices that retailers pay for the company’s clothes — a decision meant to curry favor by helping merchants improve their profit margins in a sluggish economy. 

The discounting was the main reason Levi’s second-quarter revenue plunged 12 percent from the prior year to $923.5 million, said Phil Marineau, Levi’s CEO. The second quarter marked Levi’s first loss since its September 1999 hiring of Marineau, a former Pepsico executive brought in to reverse the company’s sliding sales. 

Even though its sales have continued to atrophy, Levi’s hadn’t lost money since the quarter ending in February 1999. Although it is privately held, Levi’s discloses its quarterly financial results because some of its debt is publicly traded. 

Despite the “ugly” results in the latest quarter, Marineau said he remains confident that this year will be the last in six consecutive years of sales decline for Levi’s. 

“This is the most competitive we have been in years,” Marineau said in an interview. 

Levi’s six U.S. plant closures, which will lay off 3,600 workers, is one reason the company believes better times are ahead. 

By closing the domestic plants and shifting clothes production to less expensive overseas contractors, Levi’s expects to save $100 million — money that the company will pour into additional advertising and product development. Levi’s expects to realize the savings by next year. 

Levi’s is closing its San Francisco and Blue Ridge, Ga., plants this week. Two Texas plants — in Brownsville and San Benito — will close next month, followed by plants in El Paso, Texas, and Powell, Tenn., in September. 

If things progress the way Marineau envisions, Levi’s back-to-school and holiday product lines will be a hit with consumers, enabling the company to greatly reduce its sales declines during the final half of the year and possibly even produce a small increase. Marineau expects the sales revival to shift into high gear in 2003. 

Levi’s laid more groundwork for the turnaround by lowering the prices it charges the merchants that sell its clothes. The company isn’t lowering the suggested retail price on its clothes, but there is nothing to prevent merchants from passing on their savings to consumers. 

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On The Net: 

http://www.levistrauss.com