'Liquidity position will support the business' - Levi Strauss CEO

15 Jul '09

4 min read

Levi Strauss & Co. (LS&CO.) announced financial results for the second quarter ended May 31, 2009, and filed its second-quarter 2009 results on Form 10-Q with the Securities and Exchange Commission.

Highlights include:
• May 31, 2009 ($ millions)
Net revenues: $905
Net income (loss): $(4)

• May 25, 2008 ($ millions)
Net revenues: $936
Net income (loss): $1

The company's reported results reflected a challenging global economy and the adverse effect of currency exchange rates compared to the prior year. Net revenues declined 3 percent. On a constant currency basis, net revenues increased 5 percent for the quarter largely due to the prior period's loss of sales related to shipping issues during the stabilization of a new enterprise resource planning system (ERP) in the U.S. business.

The company reported an improved liquidity position with approximately $503 million of cash, cash equivalents and availability under its credit facility. The company's cash position reflected strong operating cash flows in the quarter. Inventory was down $29 million compared to the end of last year.

“We are focusing on the fundamentals and operating our business with discipline and rigor in this challenging retail environment,” said John Anderson, president and chief executive officer. “Our cash flow is robust and our liquidity position will support the business and our investment in strategic initiatives. We acquired 73 outlet stores in the United States this week, complementing our existing retail network and building our brands. We continue to focus on strengthening our business during these difficult times so we can capitalize on our position when the economy improves.”

Second-Quarter 2009 Highlights
• Gross profit in the second quarter decreased to $415 million compared with $437 million for the same period in 2008, primarily due to the effect of currencies. Gross margin for the quarter was 45.9 percent compared with 46.7 percent in the same quarter of 2008. Gross margin was adversely impacted by currencies but benefited from lower inventory markdowns.
• Selling, general and administrative (SG&A) expenses for the second quarter decreased to $359 million from $386 million in the same period of 2008. The reduction in SG&A expense was largely driven by the effects of currency. The company also incurred lower ERP-related, distribution and marketing costs, offset by higher selling costs associated with additional company-operated stores and increased pension expense.
• Operating income for the second quarter increased to $56 million compared with $52 million for the same period of 2008, primarily reflecting the lower SG&A expenses.

Regional Overview:
Regional net revenues for the quarter were as follows:
Net Revenues ($ millions)
• May 31, 2009
Americas: $518
Europe: $221
Asia Pacific: $166

• May 25, 2008
Americas: $477
Europe: $268
Asia Pacific: $191

• As Reported
Americas: 8%
Europe: (17)%
Asia Pacific: (13)%

• Constant Currency
Americas: 12%
Europe: 1%
Asia Pacific: (6)%

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