Levi Strauss & Co.’s accelerated shift into retail gear helped it boost fourth-quarter profits 28.4 percent, and the company has no plans to alter its increasingly vertical orientation.
This story first appeared in the February 9, 2011 issue of WWD. Subscribe Today.
The San Francisco-based denim giant grew its base of company-owned stores to 470 units at the end of 2010, about 190 of them in the Americas, from 414 a year earlier. Overseas, franchised units grew to about 2,000 from about 1,600 in the same period.
In the back half of 2010, Levi Strauss opened about 50 stores for Denizen, its new label based in Asia, primarily in China, India, Singapore and South Korea.
The company plans to continue its pace of retail expansion in 2011. “China — where we have over 500 franchise stores — continues to be a huge opportunity, as are India, Indonesia and Europe,” John Anderson, president and chief executive officer, told WWD.
Much of the retail sales growth in the U.S. has been concentrated in the outlet business, where comparable-store sales figures have improved, said chief financial officer Blake Jorgensen.
Bolstered by the flagship brand’s recent global vitality and improved performance from Dockers in U.S. department stores, net income reached $86.4 million for the three months ended Nov. 28, up from $67.2 million in the prior-year quarter. Total revenues grew 6.7 percent, to $1.29 billion from $1.21 billion, which included an 8.7 percent increase in licensing royalties to $28.4 million. Gross margin fell back to 50.2 percent of revenues from 51.1 percent in the 2009 quarter.
By region, sales in the Americas rose 7.2 percent to $772 million, Europe was up 4.2 percent to $300 million and Asia-Pacific revenues added 8.5 percent to reach $218 million. At constant currency rates, the Americas were up 7 percent; Europe, up 11 percent, and Asia-Pacific, up 3 percent.
For the full year, net income rose 3 percent to $156.5 million from $151.9 million. Revenues increased 7.4 percent to $4.41 billion from $4.11 billion, with licensing royalties 2.2 percent higher at $84.7 million. Gross margin advanced to 50.4 percent of revenues, up from 48.1 percent in 2009.
Retail growth was noted in all three of Levi’s sales regions. Revenues in Japan, however, continued to decline, Anderson said, as the company battled gloomy macroeconomic conditions in that market.
The launch of the Levi’s Curve ID fit system, which is based on a woman’s shape rather than size, has “exceeded our expectations,” said Anderson. That program made its debut in Levi’s stores last year and is rolling out to wholesale customers now, beginning with Macy’s and Kohl’s. Remaining wholesale customers, including J.C. Penney, will receive Curve ID product through the third quarter.
Improvements at Dockers in the department store channel have been driven by slim fits, fashion finishes and new colors, said Anderson. “We’ve brought a lot of freshness into the category. It’s a category that hasn’t seen a lot of innovation for years and there’s a whole new consumer looking for a khaki product.”