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Levi Strauss President pleased with solid Q3 performance

03
Oct '08
Levi Strauss & Co. (LS&CO.) announced financial results for the third quarter ended August 24, 2008 and filed its third quarter 2008 results on Form 10-Q with the Securities and Exchange Commission.

Higher net revenues reflected growth in each of the company's three regions. The increase in net revenues was primarily driven by currency, the addition of brand-dedicated retail stores worldwide and sales growth at existing stores.

Revenues were adversely impacted by wholesale customer Chapter 11 filings in the United States during the second and third quarters, and slower performance in certain markets impacted by weakening economic conditions. The net income increase in the third quarter compared to the same period in 2007 primarily reflected lower interest expense.

The ongoing stabilization of the company's U.S. enterprise resource planning (ERP) system led to improved order fulfillment and lower costs in the third quarter compared to the second quarter.

"I am pleased with our solid third-quarter performance,” said John Anderson, president and chief executive officer. “All three of our regions grew, demonstrating that our global strategies are working even in the face of difficult economic conditions around the world. The Levi's brand is performing well globally. And our emerging markets and expanding retail network continue to provide revenue growth.

“Looking at the balance of the year, we are very mindful that economic conditions are deteriorating in many of our key markets around the world. In this challenging environment, we are continuing to invest in the business, including launching our first-ever global Levi's 501 campaign,” added Mr. Anderson.

Third Quarter 2008 Highlights:
• Gross profit in the third quarter increased to $532 million compared with $486 million for the same period in 2007. Gross margin for the third quarter increased to 47.9 percent of revenues compared with 46.3 percent of revenues in the third quarter of 2007. Gross margin benefited from a change in the sales mix, increased company-operated store sales and lower sourcing costs.

• Selling, general and administrative (SG&A) expenses for the third quarter increased to $385 million from $343 million in the same period of 2007. Increased expenses in the 2008 period include the effect of currency exchange, higher selling costs related to additional company-operated retail stores and higher expense related to the U.S. ERP stabilization. SG&A in the third quarter of 2007 was positively impacted by a $14 million benefit plan curtailment gain that was not repeated in the 2008 period.

• Operating income for the third quarter was $144 million compared with $143 million for the same period of 2007. Higher regional operating income in the 2008 period was partially offset by higher corporate expenses. The increase in corporate expenses was largely a result of lower expenses in the third quarter of 2007 due to the benefit plan curtailment gain.


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