By  on April 11, 2007

NEW YORK — Momentum was on the side of Levi Strauss & Co. during the first quarter, but just barely.

Declines in its mass channel business in the U.S., negligible gains in Europe and a significant decline in two of the company's largest Asian markets took the shine off the San Francisco-based denim giant's otherwise notable earnings and sales gains for the three months ended Feb. 25.

"We had another good quarter for the company and we're off to a good start for 2007," said John Anderson, president and chief executive officer, during a conference call with analysts. "However, we still have some underperforming businesses and we're working to correct those issues."

Earnings for the quarter jumped 61 percent to $86.6 million from $53.8 million. Total revenues rose 7.2 percent to $1.04 billion from $967.6 million. Sales rose 7.2 percent to $1.01 billion from $947.9 million, with the Levi's brand accounting for 73 percent of sales. Licensing revenues rose 6.8 percent to $21.1 million from $19.8 million.

The privately owned firm releases its financial results because of its publicly traded bonds.

Management characterized the quarter as "solid," pointing to revenue increases in North America, Europe and the Asia Pacific region. North America, the company's largest business segment, was the only legitimate standout, with revenues rising 6.9 percent to $584 million from $546.4 million. Robert Hanson, president of the North American region, attributed the increase to a strong response in the men's and young men's U.S. Levi's business. Levi Strauss Signature, the company's mass channel brand, continued to decline "slightly" during the quarter, according to Hanson. Management seems wary of the strength of the U.S. market given the effects of retail consolidation and the uncertainty surrounding the housing and stock markets, as well as rising energy prices.

Revenues for the Asia Pacific region rose 4.3 percent to $188.1 million from $180.4 million. However, sales in India, China and Hong Kong offset a substantial slide in Japan and South Korea, the largest businesses in the region. Combined sales in Japan and South Korea declined 14 percent during the quarter, while sales were up more than 60 percent in China and India.

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