Levi Strauss sales rise, profits surge in latest quarter

By

Sandra Halliday

Published
Oct 12, 2016

Levi Strauss & Co saw revenue rising in Q3 as its international and direct-to-consumer businesses (which includes its own stores and e-commerce ops) grew. But profits surged by 69% to $98m in the three months to August 28.

Net revenues grew 4% to $1.185bn on a reported basis. But currency exchange had a negative effect and turnover rose 5% currency-neutral. The fugures were boosted by higher direct-to-consumer sales, which grew 14%. The company’s store network also performed well, while currency-neutral wholesale revenues increased in low single-digits for the quarter.

The net income rise primarily reflected the revenue growth and a decline in charges related to the firm’s productivity initiative that had dented profits in Q3 last year. Even without that beneficial effect, adjusted earnings before interest and taxes (EBIT) grew a still-healthy 14% to $146m as those increased direct-to-consumer sales proved profitable and the company cuts its advertising costs.

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Its CEO Chip Bergh said that the company was pleased with its performance as it saw revenue growth across all three regions and that its stores and e-tail ops were both growing in double-digits. But he added that Levi Strauss is facing a continued challenging environment, especially in its domestic market, the US.

The company also saw a fall in the gross margin for Q3 at 50.0% of revenues compared with 50.2 percent of revenues a year earlier. This happened as lower international costs and product costs were offset by the negative effects of currency exchange and lower margins in the US wholesale business.

Despite this, in the Americas, currency-neutral net revenues rose 3% as direct-to-consumer and wholesale revenues grew in Mexico. Net revenues in the US declined slightly, as direct-to-consumer growth was offset by that decline at wholesale.

In Europe, excluding unfavourable currency effects, net revenues grew 10% reflecting direct-to-consumer growth. And in Asia, excluding those currency effects, net revenues grew 6%. This was also primarily due to direct-to-consumer expansion as well as improved wholesale performance.