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Challenges in Key Markets Leave Levi 3Q Sales Down

NEW YORK — A one-time benefit related to the planned closing of a U.S. distribution center caused earnings to spike for the Levi Strauss & Co. during the third quarter, an accomplishment that was overshadowed by sales declines in several key...

NEW YORK — A one-time benefit related to the planned closing of a U.S. distribution center caused earnings to spike for the Levi Strauss & Co. during the third quarter, an accomplishment that was overshadowed by sales declines in several key markets.

“We improved our profitability and cash flow, our primary objective this year,” Phil Marineau, who will complete his tenure as chief executive officer at the end of the year, said in a statement. “We’re addressing a number of challenges to our business, including fixture reductions at U.S. Wal-Mart stores and a sales decline in Japan.”

For the three months ended Aug. 27, the San Francisco-based denim manufacturer saw earnings shoot up 28.8 percent to $49.3 million, compared with earnings of $38.2 million reported in the same period a year ago. Much of the increase was attributed to a $29 million gain stemming from the planned closure of a distribution center located in Little Rock, Ark. The closure will eliminate 315 employees by early 2007.

Revenues for the period fell 1.3 percent to $1.02 billion from $1.04 billion. Sales fell 1.5 percent to $1 billion from $1.02 billion, while licensing revenues rose 9.2 percent to $19.3 million from $17.7 million.

Wal-Mart’s decision during the first quarter of the year to reclaim shelf space in its apparel area for its proprietary brands has stifled the momentum of the company’s Levi Strauss Signature brand. U.S. Signature sales fell 10.9 percent to $92.8 million during the quarter, compared with sales of $104.1 million in the year-ago quarter.

The core Levi’s brand also experienced softness, with sales for the quarter sliding 1 percent to $345.1 million from $348.5 million. Sales of the Dockers brand in the U.S. rose 2.8 percent to $175.1 million from $170.2 million.


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