Levi Strauss & Co: Europe holds its own

By

Olivier Guyot

Published
Jul 9, 2014

Levi Strauss & Co is doing well in Europe. For the second consecutive quarter, the American company recorded an increase in European business. For the second quarter of its fiscal year ending on May 25, it posted a turnover of 192 million euros (261 million dollars), up 3% compared to the same period the year before.

The company emphasizes that the development of its retail network and its improved performance has helped to balance out less glowing results from its wholesale segment. The company saw its operating profit improve by 4% to 28 million euros. It’s an improvement that management attributes to cost-cutting measures in the region.

But Europe seems to be the exception. Overall, Levi Strauss & Co posted a 2% sales decline (excluding currency fluctuations) to 1,082 billion or 795 million euros, while earnings before interest and taxes (EBIT) declined by 6% to 68 million euros. Its operating income has been battered by restructuring costs: it dropped from 73 to less than 48 million euros.

In the Americas, the company saw its sales decline by 3% to 474 million euros, primarily due to a decline in wholesale sales, and its operating income was -8% to 80 million.

But it’s in Asia that the group suffered the most as it dealt with a strong promotional environment. Its sales dropped by 2% to 129 million euros and its operating profit collapsed by 26% to less than 18 million euros.

The company’s net profit was strongly affected by the restructuring plan announced earlier this year. It went from 35 million last year during the same period to 8,000,000 euros in 2014.

The company said its restructuring costs amounted to more than 20 million euros and saw a debt extinguishment charge of 8 million.

Levi Strauss & Co’s management pointed out that over the last six months, the total cost of its restructuring plan has risen to 68 million euros. Following this, it aims for annual savings between 73 and 92 million euros.