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Net income up at Levi Strauss
12
Oct '11
Levi Strauss & Co. announced financial results for the third quarter ended August 28, 2011, and filed its third-quarter 2011 results on Form 10-Q with the Securities and Exchange Commission.

Highlights include:
Third-quarter net revenues increased 9 percent on a reported basis primarily due to the Levi's brand, through the expansion and performance of the company's retail network. Excluding the effect of currency, net revenues improved 4 percent. Net income increased to $32 million, as a decline in operating income was more than offset by a lower tax rate.

“In the third quarter, we saw continued revenue growth from the Levi's brand in markets around the world, but increased cotton costs continued to put pressure on the margins of all our products,” said Blake Jorgensen, chief financial officer of Levi Strauss & Co. “Going forward, while dealing with the challenging economic environment and volatile raw material costs, we will focus on controlling our expenses and managing inventory.”

As the company previously announced, Chip Bergh joined as President and Chief Executive Officer on September 1, 2011. “I have spent the first month immersed in getting to know our employees, customers and consumers first-hand,” said Bergh. “I joined LS&Co. because I believe we have tremendous brands with significant upside potential. My near-term focus is on navigating a difficult economic environment and cautious consumer spending by concentrating on structural economics, cash management and ensuring our brands are delivering compelling value to consumers around the world.”

Third-Quarter 2011 Highlights
Gross profit in the third quarter increased to $569 million compared with $544 million for the same period in 2010, reflecting the company's higher net revenues and a favorable currency impact. Gross margin for the third quarter decreased to 47 percent of revenues compared with 49 percent of revenues in the same quarter of 2010. The gross margin decline reflects the impact of higher-priced cotton, which was not fully offset by the company's product price increases, and an increase in discounted sales at Levi's and Dockers brands.

Selling, general and administrative (SG&A) expenses for the third quarter increased to $489 million from $457 million in the same period of 2010. Higher SG&A included the effects of currency and additional selling expenses related to the expansion of the company-operated retail network.

Operating income for the third quarter declined to $81 million compared with $86 million for the same period of 2010, as the revenue increase was offset by the lower gross margin and higher SG&A.

Regional Overview
Net revenues grew in the Americas due to the Levi's brand, which had higher sales in the company's retail stores, primarily its outlet stores, and the launch of Denize. Dockers brand net sales in the region declined.

The reported netrevenues increase in Europe was due to currency; net revenues were down on a constant-currency basis. Gains from the expansion of the company-operated retail network and the continued success of the Levi's Curve ID collection for women were more than offset by declines in the wholesale business.

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