Levi Strauss & Co. announced financial results for the second quarter ended May 25, 2014.
Net revenues declined two percent on a reported basis and one percent on a constant-currency basis, reflecting lower sales at wholesale in the Americas, partially offset by improved performance in Europe and Asia. Second quarter net income declined to $11 million, primarily reflecting $28 million in restructuring and other charges related to the company's global productivity initiative, and a debt extinguishment charge of $11 million associated with the partial redemption of its 7.75% Euro Senior Notes due 2018. Excluding the global productivity initiative charges, adjusted EBIT declined six percent to $93 million due to a lower gross margin and the net revenues decline.
“While we are encouraged by business improvements in Europe and Asia, ongoing traffic declines and an increasingly promotional environment continue to pressure our Americas region,” said Chip Bergh, president and chief executive officer. “We will continue to focus on what’s within our control - from cost structure, to conversion in our stores, to engaging consumers with great product and innovation - in order to drive long-term profitable growth. We have a strong second half plan in place, including the launch of the new Levi’s advertising campaign that brings to life the consumer insight that ‘you wear jeans, you “Live in Levi’s”’.”
Second-Quarter 2014 Highlights
Gross profit in the second quarter declined to $530 million compared with $549 million for the same quarter of 2013. Gross margin for the second quarter declined to 49.0 percent of revenues compared with 49.9 percent of revenues in the same quarter of 2013. The gross margin decline reflected an unfavorable sales mix and product investment costs.
Selling, general and administrative expenses (SG&A) for the second quarter decreased to $446 million from $449 million in the same quarter of 2013. SG&A declined slightly, as savings associated with the company's global productivity initiative were partially offset by $9 million in related charges, primarily consulting fees for centrally-led cost-savings and procurement projects.
Restructuring charges of $19 million were recorded in the second quarter of 2014 associated with the company's global productivity initiative, primarily reflecting severance benefit costs and pension plan curtailment losses associated with staffing reductions. Aggregate first- and second-quarter restructuring and related charges of $93 million associated with the company’s global productivity initiative are anticipated to drive annualized savings of $100-125 million.