Levi Strauss announces profit spike

0 Comments | Oakland Tribune, Oct 11, 2007 | by Associated Press

SAN FRANCISCO -- Levi Strauss & Co. extended a two-year streak of higher profits during the third quarter despite decelerating sales growth that reflected eroding demand for the jeans maker's discount and Dockers brands in the United States.

The San Francisco-based company said Wednesday that it earned $60.9 million for the three months ended Aug. 26, up 24 percent from $49.3 million at the same time last year. It marked the eighth consecutive quarter in which Levi's profit has improved from the previous year.

Management attributed most of the latest gains to lower expenses for taxes and loan repayments.

Revenue edged up 2 percent to $1.05 billion, a drop-off from the first half of the fiscal year when sales climbed by 6 percent. The slowdown was centered in the United States amid sagging sales of Levi's discount Signature brand and casual line of Dockers clothing. The company's flagship Levi Strauss brand fared better, with sales rising in the United States as well as the rest of the world, management said.

Throughout North America, Levi's revenue fell 4 percent in the quarter. That decline was more than offset by better sales in Europe and Asia Pacific.

"North America's lower revenue this quarter was disappointing, but I am optimistic about the region's results for the year," John Anderson, Levi's chief executive officer, said in a prepared statement.

In an interview, Anderson depicted the dip in U.S. sales of Dockers as blip caused by a shift in the timing of merchandise orders by retailers.

He was less upbeat about the four-year-old Signature label, which has been suffering since Wal-Mart Stores Inc. decided to de- emphasize the brand in early 2006. Although Signature is expected to continue to struggle for at least several more months, Anderson said Levi has no plans to abandon the brand in the United States like it did in Europe earlier this year.

Levi is a privately held company owned by the descendants of its founder but discloses its quarterly results because some of its debt is publicly traded.

The company's sales have been crumbling for most of the past decade as its iconic jeans lost their appeal among budget-minded shoppers who gravitated to less expensive brands and trendy consumers who embraced other styles.

But Levi has been on the mend during the past two years, bolstered by years of painful cost-cutting and sharper fashion sense.

"We are locked and loaded and feeling good about where we are," Anderson said.

The company is now on pace for its most profitable year in more than a decade. Through the first nine months of the current fiscal year, Levi's profit has increased by 35 percent to $193.2 million while revenue has climbed 5 percent to $3.1 billion.

Levi's financial comeback has stirred talk the company might go public, something that management has acknowledged is a possibility without setting a timetable for making a decision.