Please ensure Javascript is enabled for purposes of website accessibility

Can Target Sell Its Customers Higher-End Jeans?

By Daniel B. Kline – Updated Aug 12, 2019 at 5:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The "big box" retailer's expanded partnership with Levi's seems like a perfect fit.

Target (TGT -0.35%) has built its apparel business around owned and operated brands, as well as partnerships to distribute mass-market, generally lower-end brands. It's a strategy that has the company partnering with Hanesbrands to sell Champion (a deal that's being winded down) rather than carry Nike or UnderArmour.

Essentially, the retailer has offered low-cost, high-value clothing, whether from its own brands or through partners. That's how the chain has worked with Levi Strauss & Co. (LEVI): For about 10 years, Target has sold DENIZEN, a value jeans brand made by Levi Strauss.

That deal made sense, as it allowed Target to offer reasonable-quality jeans from a respectable, albeit not-that-trendy manufacturer at an appealing price. Now, however, Target is expanding its relationship with the jeans maker to sell its Levi's Red Tab label, which includes the company's higher-end, better-known lines.

Two people where Jeans. One shows a Levi's Red Tab.

Target will sell the Levi's Red Tab line online and in select stores. Image source: Levi Strauss.

What is Target doing?

The retail chain has decided to step into a void left by the closure of so many department stores, including most of the Sears chain. Levi's had traditionally viewed Target as a "big box" store, and it has preferred to sell its signature jeans in traditional department stores.

Target, however, has thrived even while traditional department stores have struggled. The retail chain has also improved the look of its stores and has focused more on fashion, including some celebrity partnerships. That has raised the chain's cachet with clothing consumers and likely made it more attractive for Levi's.

The two companies tested part of the men's Red Tab line in 20 stores last spring. That went well, and as of August 11 "Target will offer a curated assortment of men's -- and now women's -- Red Tab products in more than 50 stores across the country near college campuses and highly trafficked urban locations," according to a press release. The offering, which will be available nationally at Target.com, will include jeans, tops, and jackets.

"This partnership is a great example of how Target continues to offer a curated assortment of highly relevant and premier national brands like Levi's, while also differentiating ourselves by offering only at-Target brands that we create just for our guests," explained Target Chief Marketing Officer Mark Tritton in the press release.

A good fit?

While Levi's Red Tab line is a step up for Target, it's still a relatively modest-priced line. Offering it gives the retailer's customers more choice, and lets them buy a brand that does not scream "I got this at Target," which might be important to fashion-conscious shoppers.

With retail changing, Levi Strauss needs more quality retail partners to distribute its brands. Target likely offers a better environment to sell its signature products than decaying Sears stores, and Target.com gives the jeans maker a very strong digital platform.

This deal seems like a very good fit for both companies. Target gets to look a little bit upscale with a product line that complements what it already sells, while Levi Strauss gets some much-needed retail and digital distribution.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nike. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Target Stock Quote
Target
TGT
$156.41 (-0.35%) $0.55
Levi Strauss & Co. Stock Quote
Levi Strauss & Co.
LEVI
$16.58 (%)

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
342%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.