Falling sales in the U.S. and European markets coupled with rising costs led Levi Strauss & Co. to a 41.2 percent earnings slide during the third quarter.
For the three months ended Aug. 30, the San Francisco-based denim giant saw earnings decline to $40.7 million, compared with earnings of $69.2 million during the same period a year ago. Selling, general and administrative expenses rose $7.4 million, or 1.9 percent, to $396 million.
“There’s no question we’re in tough times,” John Anderson, president and chief executive officer, said during a conference call with analysts. “Despite these conditions, our Levi’s brand performed well globally, particularly in America.”
Revenues fell 6.3 percent to $1.04 billion during the quarter from $1.11 billion. Sales declined 6.1 percent to $1.02 billion from $1.09 billion and licensing revenues dropped 17.1 percent to $18.6 million from $22.4 million.
Unfavorable currency exchange rates and a weak retail environment sent revenues for the company’s European business down 13 percent to $266 million compared with $305.9 million a year ago. The poor exchange rate negatively affected revenues by about $36 million. Declines were linked primarily to the wholesale channel and the women’s Levi’s Red Tab business.
Despite expectations of persistent tough market conditions, the company continues to invest in expanding its retail operations in Europe. Levis marked the opening of its largest store in Europe in September — a 6,480-square-foot flagship in Rome. Similar projects are being eyed for Paris and London.
In the Americas, lagging sales of the Dockers brand in the U.S. and the mass channel Signature label pulled down revenues 5.1 percent to $615.9 million from $648.9 million. The Levi’s brand has been a primary driver, particularly the men’s 501 style and straight and skinny fits. Sales of men’s and women’s Levi’s product were up during the quarter.
“We are seeing wholesale customers continue to manage their inventories pretty tightly, regardless of market conditions or brand performance,” said Robert Hanson, president of Levi Strauss Americas.
Hanson said wholesale customers have become accustomed to driving performance off lower inventory levels and are unlikely to change their habits in the near term.
The Asia-Pacific region was the only area to post gains during the quarter, revenues were up 1.6 percent to $158.4 million from $156 million. The sole weak point in the region has been Japan. Management saw a rapid shift in the shopping habits of Japanese consumers during the second quarter as they gravitated to cheaper fast-fashion retailers.
“We’ve seen a fundamental recalibration of consumers,” Anderson said of the Japanese market. “Outside Japan, we’re not seeing that.”
For the first nine months of the year, earnings fell 49.3 percent to $84.6 million from $167 million. Revenues declined 7.5 percent to $2.9 billion from $3.13 billion. Sales were off 7.3 percent to $2.84 billion from $3.06 billion. The Levi’s brand accounted for 77 percent of net sales, or $2.18 billion. Licensing revenues fell 13.5 percent to $56.8 million from $65.6 million.
All three global regions saw revenues decline, led again by Europe with a 16.4 percent fall in revenues to $754.5 million from $902.3 million. Currency exchange accounted for $129 million in revenue declines. Revenues for the Americas slid 4 percent to $1.64 billion from $1.71 billion. Asia-Pacific revenues declined 3.3 percent to $504.6 million from $521.7 million.
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye
Did you know: @carlychaikin of "Mr. Robot" has been painting for about a decade? The actress, who plays Darlene on the show, is a self-taught artist who lists Salvador Dalí and Chuck Close as some of her idols. Chaikin told WWD that painting is a form of meditation for her — A much-needed one given the intensity of "Mr. Robot." See a piece Chaikin is working on at WWD.com (📷: @jilliansollazzo) #wwdeye