Levi Strauss sees margins leap

By

Olivier Guyot

Published
Jul 12, 2013

Levi Strauss has reported a 246% increase in net income for its second quarter, ended May 26. The American group posted income of 48 million dollars for this quarter against 13 million for the same period in 2012.

Total revenue for the period increased by 5% to reach just over 1.099 billion dollars. Gross margin for the second quarter was 50% of revenues compared with 46% of revenues in the same quarter of 2012. According to the group, reduced cotton prices this year and a phase-out of the Denizen brand in Asia combined with strong sales in directly-operated stores lead to an overall increase. Operating income for the second quarter grew to 100 million from 46 million dollars in the same period of 2012 primarily due to the higher gross margin.

“We are encouraged by the second quarter’s progress — revenues up five percent and dramatically improved gross profit and net income. The results reflect in part the key choices we made last year to focus on our profitable core business, expand selectively beyond the core and become a world class retailer,” said Chip Bergh, president and chief executive officer. “While we clearly have more work to do, we will sharpen our focus on our core brands — Levi's and Dockers — with compelling product and innovation, while also investing behind brand-building and improving the overall consumer experience, whether in our own stores or with our key retail partners.”

Levi Strauss strategy seems to finally be reaping its rewards. Sales in North American rose by 10% though remained stagnant in Europe due to a decrease in wholesale activity. Sales in Asia fell by 4% to 130 million caused by the phasing-out of Denizen. Despite this, the group posted a growth in operating income in all regions.