By  on February 15, 2006

NEW YORK — Levi Strauss & Co. can celebrate a strong 2005, even though its executives are already expressing caution about the first half of 2006.

Booming sales in Asia and stabilization in the North American market helped the denim giant put the skids on eight years of declining sales in 2005, with an increase of 1.3 percent to $4.12 billion.

The 152-year-old San Francisco-based jeans giant also swung back to fourth-quarter profitability and finished the year with a triple-digit earnings gain.

"We set out to improve profitability and that's exactly what we did," said Phil Marineau, president and chief executive officer, during a company conference call.

For the quarter ended Nov. 27, the company reported earnings of $43.6 million, compared with a loss of $19.4 million in the same period a year ago. Sales for the three-month period remained flat, with the North American and Asian markets making up for double-digit declines in Europe.

Chief financial officer Hans Ploos van Amstel said the Levi's, Dockers and Levi Strauss Signature brands all made sales gains in North America during the quarter. North American sales rose 5 percent to $726 million, while Asian sales picked up 7 percent to $196 million.

However, a depressed retail environment in Europe that has existed since the second quarter of 2005 continued to weigh on results, a trend that management believes likely will carry into this year. European sales fell 17 percent during the quarter to $235 million. Management remains confident the company is positioned to experience gains once economies rebound in countries such as the U.K. and Germany.

"As we said before, we have the right strategic plan to stabilize that business, but it will take more time," said van Amstel, who pointed out operating income in Europe improved by 24 percent in the quarter.

The poor sales environment has made European retailers wary of taking any unnecessary risks.

"Consumer demand has been very soft for most of 2005 and this has forced retailers across Europe to be extremely cautious in investing in new product on top of existing high inventory levels," said Paul Mason, president of Levi Strauss Europe.

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