By  on October 12, 2005

NEW YORK — Levi Strauss & Co. took the sting out of a decline in third-quarter earnings by delivering a sales gain in a softening retail environment.

"I'm pleased with our results, especially in light of the slowdown in the retail environment that we experienced in this quarter," said Phil Marineau, president and chief executive officer, during a conference call.

Higher costs put a damper on quarterly earnings for the 152-year-old San Francisco-based company, falling 17.9 percent to $38.2 million from $46.6 million. However, the bulk of those expenses were associated with increased investments for advertising and brand building rather than any operational inefficiencies, said Marineau.

Sales for the three months ended Aug. 28 rose 2.4 percent to $1.02 billion from $994.6 million in the same period last year. North American sales rose 4.1 percent to $656.9 million, led by strong performances in the U.S. for the Levi's and Levi Strauss Signature brands. U.S. Levi brand sales rose 4.4 percent to $344.7 million.

Levi Strauss Signature continued to prove itself as one of the company's recent successes, with brand sales increasing 17.8 percent to $103.3 million in the U.S. Scott LaPorta, president of the U.S. Signature business, said the line now has the number-one share in men's at one of its major retailers. LaPorta declined to identify which one, but Wal-Mart and Target are the two largest retailers carrying the line, which also is being rolled out into Kmart stores. LaPorta and Marineau also pointed out that Signature's growth has not come at the cost of the core Red Tab line.

There was even cause for optimism in the company's beleaguered Dockers segment, which experienced a sales decline of 2.4 percent to $162.8 million in the U.S. John Goodman, only four months into his tenure as Dockers' U.S. president, said more premium and stylish products were fueling a resurgence in the men's business. The next step is reinventing the women's segment, a task that will take considerably more effort.

"The loss of fixtures and retail doors has compounded the challenges we face in the women's business," said Goodman.

Marineau acknowledged that energizing the women's Dockers business would require a faster-paced approach.

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