Advantageous currency exchange rates and rising sales from company-owned stores lifted Levi Strauss & Co. to strong earnings and revenue gains in the third quarter.
“All three of our regions grew, demonstrating that our global strategies are working even in the face of difficult economic conditions around the world,” said John Anderson, president and chief executive officer.
For the three months ended Aug. 24, the San Francisco-based jeans giant saw earnings rise 14.6 percent to $69.2 million, compared with earnings of $60.9 million in the same period a year ago.
Revenues rose 5.7 percent to $1.11 billion from $1.05 billion, with gains across all three of the company’s geographical markets. Sales rose 5.5 percent to $1.09 billion from $1.03 billion. Licensing revenues ballooned 15.1 percent to $22.4 million from $19.5 million.
European revenues shot up 15.6 percent to $305.9 million from $264.6 million. However, excluding the benefits of currency exchange, sales would have improved only 3 percent. Anderson said the company’s wholesale business has been adversely affected by the economic slowdown, particularly in Spain and Germany. The European women’s business has also been underperforming, he said.
Sales in the Asia-Pacific region grew 5.9 percent to $155.9 million from $147.3 million. Without the benefit of currency exchange, Asia-Pacific revenues would have risen 3 percent. Sales continue to falter in Japan, the company’s oldest and most mature Asian market. Anderson said management is hoping to turn things around by focusing on new men’s core fits, upgrading its premium products and bringing new energy to the 501 label.
Revenues for the Americas rose 1.4 percent, even in the face of the dire retail environment and the bankruptcies of several major wholesale customers — Boscov’s, Goody’s Family Clothing Inc. and Mervyns — in the last six months. Management attributed the gains to higher sales from company-owned stores and strength in the Levi’s brand. The company has opened 63 stores worldwide over the past 12 months.
“We’re seeing [Levi’s brand] performance be robust in the face of a pretty difficult environment in the United States,” said Robert Hanson, president of the North American region.
Hanson said problems implementing a new management technology system that forced the company to suspend shipments for a week during the second quarter were resolved “faster than expected” during the third quarter.
The Dockers business, despite gaining revenues during the quarter, continues to face challenges, according to Hanson, adding, “We have a lot of work to do over the next year.”
Despite the strong third quarter, flat revenues and a sizable increase in selling, general and administrative expenses depressed results for the first nine months of the year. Earnings in the period fell 13.6 percent to $166.9 million from $193.2 million, dragged down by a 14.7 increase in SG&A expenses.
Revenues for the nine months rose 0.8 percent to $3.13 billion from $3.10 billion. Sales inched up 0.6 percent to $3.06 billion from $3.04 billion, while licensing revenue improved 10 percent to $65.6 million from $59.6 million.
European revenues spiked 13.6 percent to $902.3 million, again greatly helped by currency exchange. Asia-Pacific revenues rose 6.7 percent to $521.7 million from $489.1 million. Revenues for the Americas fell 6.4 percent to $1.71 billion from $1.82 billion.
“We expect the economic conditions in most of our mature markets to remain challenging for the foreseeable future,” Anderson said. “But we have strong brands and a global business that is proving its resilience in these tough times.”
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