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The Levi's brand is performing well
14
Jul '10
Levi Strauss & Co. announced financial results for the second quarter ended May 30, 2010, and filed its second-quarter 2010 results on Form 10-Q with the Securities and Exchange Commission.

Second-quarter net revenues increased 8 percent compared to last year due to the continued worldwide growth of the Levi's brand. Net revenues benefited from business acquisitions made during 2009 and ongoing retail expansion, partially offset by revenue declines in the wholesale channel in certain markets. Excluding the effect of currency, net revenues improved 5 percent.

Operating income improved from $56 million to $69 million through the positive effect of currency translation during the quarter. Below operating income, the company recorded financing costs and the non-cash write-down of deferred tax assets in the second quarter of 2010, partially offset by foreign currency gains during the quarter as compared to losses in the prior year. As a result, the net loss attributable to the company was higher as compared to last year. Due to first-quarter results, net income attributable to the company for the first six months of the year is consistent with the same period last year.

The company maintained a strong liquidity position during the second quarter. At May 30, 2010, cash and cash equivalents were $353 million and $180 million was available under its revolving credit facility.

“We had another good quarter, which gives us solid revenue growth and operating income for the first six months of the year,” said John Anderson, president and chief executive officer. “We are seeing the benefit of our investments in the business over recent years. The Levi's brand is performing well, and consumers are responding to our more innovative products.”

Second-Quarter 2010 Highlights

• Gross profit in the second quarter increased to $499 million compared with $415 million for the same period in 2009. The increase in gross profit was driven by higher gross margins and the effects of currency. Gross margin for the second quarter increased to 51 percent of revenues compared with 46 percent of revenues in the same quarter of 2009. The gross margin improvement reflected increased contribution from company-operated retail stores, which typically generate a higher gross margin than the wholesale business.
• Selling, general and administrative (SG&A) expenses for the second quarter increased to $430 million from $359 million in the same period of 2009. Higher SG&A was primarily due to additional selling expenses related to the expansion of the company-operated retail network, higher advertising and promotion expense as the company increased support for its Levi's and Dockers brands, and higher administration expenses associated with pension and postretirement benefit plans.
• Operating income for the second quarter was $69 million compared with $56 million for the same period of 2009. The 23 percent increase primarily reflects the favorable impact of currency as the higher gross margins were offset by higher SG&A expenses.


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