Levi's begins fiscal year with higher profits

09 Apr '08

3 min read

The company reported that its Board of Directors declared a $50 million cash dividend to common shareholders. In addition, the company reported that on March 25 it redeemed its remaining 12¼ percent bonds, further reducing long-term debt by $19 million.

The company also reported that it began implementing SAP in the second quarter in the United States. Due to issues encountered during the stabilization period, it chose to temporarily suspend shipments to U.S. customers, causing the company to miss delivery dates. It has begun to ship again and is currently working with customers to recover the missed orders. The company remains confident that SAP will optimize operations and reduce costs over the long term.

First Quarter 2008 Highlights:
• Revenues included approximately $18 million in U.S. orders that would have been shipped in the second quarter but were instead shipped in February. Operating income benefited approximately $9 million from these shipments.

• Gross profit in the first quarter increased to $545 million compared with $498 million for the same period in 2007. Gross margin increased to 50.3 percent of revenues for the first quarter compared with 48.0 percent of revenues in the first quarter of 2007. Gross margin benefited from higher-margin product mix, improved sourcing costs and lower sales allowances.

• Selling, general and administrative expenses increased to $356 million for the first quarter from $296 million in the same period of 2007. Increases in expenses in the 2008 period reflect a lower benefit plan curtailment gain and higher selling expenses related to the company's retail expansion compared to the prior year.

• Operating income for the first quarter was $187 million compared with $189 million for the same period of 2007, reflecting higher gross profit offset by higher selling, general and administrative expenses.

• Interest expense for the first quarter decreased 30 percent to $41 million compared to $58 million in the first quarter of 2007. The decrease was primarily attributable to lower debt levels and lower average interest rates during the quarter due to the company's debt refinancing actions taken over the past two years.

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