LEVI STRAUSS & CO. ANNOUNCES FIRST-QUARTER 2009 FINANCIAL RESULTS
SAN FRANCISCO (April 14, 2009) - Levi Strauss & Co. (LS&CO.) today announced financial results for the first quarter ended March 1, 2009 and filed its first quarter 2009 results on Form 10-Q with the Securities and Exchange Commission.
Highlights include:
| | Three Months Ended | % Increase
|
| ($ millions) | March 1, 2009 | February 24, 2008 | As Reported |
| Net revenues | $951 | $1,083 | (12)% |
| Net income | $48 | $97 | (50)% |
Lower reported net revenues reflected the impact of a challenging global economy; a weak retail environment in most markets worldwide; and the substantial negative effect of currency compared to the prior year, which accounted for nearly half of the net revenue decline. Reported revenues also reflected the volumes lost due to the bankruptcies of two significant U.S. customers and lower performance of the Dockers® brand. These factors were partly offset by increased sales from new company-operated and franchised stores.
The reported net income decline was driven by lower operating results. The company reported a strong liquidity position with approximately $431 million of total liquidity, including cash and cash equivalents, complemented by availability under a revolving credit facility.
"Our Levi’s® brand continues to perform relatively well in a tough retail climate," said John Anderson, president and chief executive officer. "Our sales growth in Asia Pacific demonstrates the advantage of our broad global footprint. Although our Dockers® performance was disappointing, we finished the first quarter where we expected to be given the difficult operating environment. We are focused this year on gaining market share, controlling operating costs and investing strategically to strengthen our brands during the market downturn."
First-Quarter 2009 Highlights
- Gross profit in the first quarter decreased to $445 million compared with $545 million for the same period in 2008. Gross margin for the first quarter decreased to 46.8 percent of revenues compared with 50.3 percent of revenues in the same quarter of 2008. Gross margin was impacted by higher sales allowances and discounts and higher inventory markdowns, reflecting the company’s actions to manage inventory during the quarter.
- Selling, general and administrative (SG&A) expenses for the first quarter decreased to $339 million from $359 million in the same period of 2008. A $24 million favorable impact of currencies was offset by a $4 million increase in SG&A expense. Lower advertising and promotion expense and a reduction in corporate spending helped offset increased pension expense and higher selling costs associated with the expansion of the company’s retail network.
- Operating income for the first quarter was $106 million compared with $187 million for the same period of 2008, reflecting the company’s lower revenue and gross margin during the period.
Regional Overview
Regional Net Revenues for the quarter were as follows:
| | | | % Increase (Decrease) |
| ($ millions) | March 1, 2009 | February 24, 2008 | As Reported | Constant Currency |
| Americas | $504 | $580 | (13)% | (11)% |
| Europe | $267 | $329 | (19)% | (6)% |
| Asia Pacific | $180 | $174 | 3% | 9% |
- The net revenue decrease in the Americas was primarily due to the loss of Levi’s® and Dockers® sales to U.S. customers who declared bankruptcy in 2008, weaker sales and higher sales allowances for Dockers® products in the United States, and the advanced shipments in 2008 related to the ERP implementation. These declines were partially offset by higher Signature brand sales in the region.
- Net revenues in Europe decreased on a reported and constant currency basis. Currency contributed approximately $45 million of the decline. The decline was also due to weaker wholesale performance in the company’s mature markets, reflecting the slowing retail environment in the region.
- Net revenues in Asia Pacific increased on a reported and constant currency basis. Revenues in the company’s developing markets in Asia Pacific continued to grow, driven primarily by brand-dedicated retail store expansion, particularly in China, and increased sales driven by product promotions in the region. Retail performance in the region weakened at the end of the quarter.
Balance Sheet and Cash Flow
The company ended the first quarter with cash and cash equivalents of $186 million and available liquidity of $245 million under the company’s credit facility. Inventory was up $18 million compared to the end of last year. Cash provided by operating activities was $10 million for the three-month period, compared with $107 million for the same period in 2008, primarily reflecting lower cash collections. Total debt was $1.8 billion at the end of the quarter compared to $1.9 billion at the end of the first quarter of 2008.
Investor Conference Call
The company’s first-quarter 2009 investor conference call will be available through a live audio Webcast at www.levistrauss.com/Financials/EarningsWebcasts.aspx today, April 14, 2009, at 1 p.m. PST/4 p.m. EST. A replay is available on the Web site the same day and will be archived for one month. A telephone replay also is available through April 21, 2009 at 800-642-1687 in the United States and Canada, or 706-645-9291 internationally; I.D. No. 93840507.
This news release contains, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current assumptions, expectations and projections about future events. We use words like "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Investors should consider the information contained in our filings with the U.S. Securities and Exchange Commission (the "SEC"), including our Annual Report on Form 10-K for the fiscal year ended 2008, especially in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections, as well as in our Current Reports on Form 8-K. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this news release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this news release. We are not under any obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this news release to reflect circumstances existing after the date of this news release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.
Investor Contact:
Roger Fleischmann
Levi Strauss & Co.
(800) 438-0349
Media Contact:
Jeff Beckman
Levi Strauss & Co.
(415) 501-3317