Levi Strauss' net income augments 59% in FY'13

12 Feb '14

4 min read

-In the Americas, the net revenues increase was driven by higher Levi’sbrand and Dockersbrand men’s wholesale revenues, partially offset by the decline in wholesale revenues from the Levi’sbrand women’s business. Retail sales were down compared to the prior year due to the timing of the Black Friday week in 2013. The decrease in the region’s operating income reflected the lower gross margin.

-Net revenues in Europe reflected declining sales to traditional wholesale channels and franchisees, this was partially offset by improved performance and expansion of the company-operated store network. The decrease in operating income reflected the region’s lower revenues as well as higher expenses related to advertising and the expanded store network.

-The net revenues increase in Asia Pacific primarily reflected promotional activity and the launch of the Levi’sbrand Revel collection. Underlying retail conditions in most markets in the region remain challenging. The increase in operating income reflected the phase-out of Denizenin the region.

Fiscal Year 2013 Highlights

-Gross profit for the fiscal year was $2,351 million compared with $2,199 million in 2012. Gross margin improved to 50 percent of revenues in 2013 compared to 48 percent in 2012. Gross margin improved primarily due to the benefit of the lower cost of cotton in the products we sold in the first half of 2013.

-Gross margin also improved due to favorable currency effects of approximately $25 million, and an unfavorable impact of approximately $32 million in customer support and markdown charges taken in 2012 to exit the Denizenbrand in Asia Pacific.

-SG&A expenses increased to $1,885 million for 2013 compared with $1,865 million in the prior year. The increase in SG&A was driven by higher incentive compensation expense, primarily related to improved achievement against the company's internally-set objectives. Advertising expenses also increased, reflecting new campaigns.

-Retail expenses also increased as we opened new stores. The increase was partially offset by a decline in distribution expense, reflecting a $19 million facility impairment charge the company recorded in 2012.

-Operating income for 2013 was $466 million compared to $334 million the prior year, primarily due to higher gross margin in the Americas and Asia Pacific as described above, as well as favorable currency impact.

Levi Strauss

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