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Levi Strauss net profit falls sharply in Q2
09 Jul '08
5 min read
Interest expense for the second quarter decreased to $41 million compared to $56 million in the second quarter of 2007. The decrease was primarily attributable to lower average interest rates and lower debt levels during the quarter due to the company's debt refinancing actions last year.
• “This was clearly a difficult quarter,” said Hans Ploos van Amstel, chief financial officer. “Despite the operational challenges, we continued to reduce our debt and paid a dividend to our stockholders. Our balance sheet gives us the flexibility to weather the economic cycle and invest in our brands to build our business for the long term.”
Regional Overview:
• Net revenues in the Americas' region decreased 19 percent compared with the same period of 2007. The region's results primarily reflect the challenges related to the implementation of the ERP system in the United States and the impact of the weak U.S. economy. Sales in the U.S. Dockers brand decreased substantially during the period and the U.S. Levi's and Signature by Levi Strauss & Co. brands reported smaller sales decreases. Results in the region also were adversely impacted by the Chapter 11 filing of a U.S. customer.
• Net revenues in Europe increased 10 percent on a reported basis and decreased 4 percent excluding the positive impact of currency for the quarter. The decline in constant currency reflected weaker wholesale performance in certain markets, partly offset by sales growth in the company-operated retail network.
• Net revenues in Asia Pacific increased 6 percent on a reported basis, and decreased 1 percent excluding the positive currency impact. Revenues in the company's emerging markets in Asia Pacific continued to grow, offset by declines in certain of the company's mature markets in the region, particularly the continued weak performance in Japan.
Balance Sheet and Cash Flow
After paying the previously announced $50 million cash dividend to common stockholders and reducing long-term debt by $54 million, the company ended the second quarter with cash and cash equivalents of $124 million, a decrease of $32 million from November 25, 2007. Cash provided by operating activities was $121 million for the first half of 2008, compared with $126 million for the same period in 2007, primarily reflecting lower net income offset by lower payments for interest. Total debt was $1.94 billion at the end of the second quarter.
• “This was clearly a difficult quarter,” said Hans Ploos van Amstel, chief financial officer. “Despite the operational challenges, we continued to reduce our debt and paid a dividend to our stockholders. Our balance sheet gives us the flexibility to weather the economic cycle and invest in our brands to build our business for the long term.”
Regional Overview:
• Net revenues in the Americas' region decreased 19 percent compared with the same period of 2007. The region's results primarily reflect the challenges related to the implementation of the ERP system in the United States and the impact of the weak U.S. economy. Sales in the U.S. Dockers brand decreased substantially during the period and the U.S. Levi's and Signature by Levi Strauss & Co. brands reported smaller sales decreases. Results in the region also were adversely impacted by the Chapter 11 filing of a U.S. customer.
• Net revenues in Europe increased 10 percent on a reported basis and decreased 4 percent excluding the positive impact of currency for the quarter. The decline in constant currency reflected weaker wholesale performance in certain markets, partly offset by sales growth in the company-operated retail network.
• Net revenues in Asia Pacific increased 6 percent on a reported basis, and decreased 1 percent excluding the positive currency impact. Revenues in the company's emerging markets in Asia Pacific continued to grow, offset by declines in certain of the company's mature markets in the region, particularly the continued weak performance in Japan.
Balance Sheet and Cash Flow
After paying the previously announced $50 million cash dividend to common stockholders and reducing long-term debt by $54 million, the company ended the second quarter with cash and cash equivalents of $124 million, a decrease of $32 million from November 25, 2007. Cash provided by operating activities was $121 million for the first half of 2008, compared with $126 million for the same period in 2007, primarily reflecting lower net income offset by lower payments for interest. Total debt was $1.94 billion at the end of the second quarter.
Levi Strauss & Co.
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