Levi Strauss walks away with the profits

0 Comments | Oakland Tribune, Feb 13, 2008

SAN FRANCISCO -- Levi Strauss & Co. shook off a sales slowdown in the United States late last year to boost its profit for the ninth straight quarter and cap the jeans maker's best year in more than a decade.

The San Francisco-based company said Tuesday that it earned $267 million during its fiscal fourth quarter ended Nov. 25, more than double the $96 million profit for the same time in 2006. Although it's privately owned by the descendants of its founder, Levi Strauss releases its results because some of its debt is publicly traded.

Most of Levi's fourth-quarter earnings gain stemmed from changes in the company's tax accounting, driven by its improving performance and revisions made after discussions with the Internal Revenue Service.

Levi would have made more money even without the tax benefits. The company recorded a fourth-quarter operating profit of $190 million, up 12 percent from $170 million in the comparable 2006 period.

Revenue edged up 2 percent to $1.3 billion despite a downturn in the United States, where the company continued to struggle with its discount clothing line, Signature. Levi said it plans to introduce new Signature styles later this year in an attempt to salvage the four-year-old brand.

Levi's sales in North America dipped by 2 percent in the fourth quarter, but problems there were offset in Asia and Europe, where the company benefited from the weak dollar.

If not for currency fluctuations that worked in its favor, Levi said its fourth-quarter revenue would have dipped 2 percent. For all of fiscal 2007, Levi earned $460 million, its highest annual profit since 1996.

Levi's annual sales have now improved in two of the past three years while generating a higher quarterly profit in every quarter since August 2005. Levi's 2007 revenue rose 4 percent to $4.36 billion. That's the company's biggest sales gain since 1996 as well. In another sign of an upturn, Levi's added 870 employees in 2007.

-- an about-face after the years of layoffs. Most of the new employees work in Levi's roughly 200 company-owned stores. Levi's employed 11,550 people at the end of November.

With the U.S. economy struggling to avoid a recession, Levi may be hard pressed to keep up its financial momentum this year, according to John Anderson, Levi's chief executive.

"Looking ahead, we anticipate a difficult retail environment in several markets around the world," Anderson said.

Levi also could be hurt by retailer Dillard's Inc.'s recent decision to stop carrying the company's Dockers line of casual clothing. Anderson said Levi's still hopes to get the Dockers clothes back into Dillard's stores.