LEVI STRAUSS & CO. ANNOUNCES SECOND-QUARTER 2009 FINANCIAL RESULTS
• Net Revenues Down 3%, Up 5% Exlcuding Effects of Currency
• Cash Flow Enhances Liquidity Position
SAN FRANCISCO (July 14, 2009) - Levi Strauss & Co. (LS&CO.) today announced financial results for the second quarter ended May 31, 2009 and filed its second-quarter 2009 results on Form 10-Q with the Securities and Exchange Commission.
Highlights include:
| | Three Months Ended |
| ($ millions) | May 31, 2009 | May 25, 2008 |
| Net revenues | $905 | $936 |
| Net income (loss) | $(4) | $1 |
The company’s reported results reflected a challenging global economy and the adverse effect of currency exchange rates compared to the prior year. Net revenues declined 3 percent. On a constant currency basis, net revenues increased 5 percent for the quarter largely due to the prior period’s loss of sales related to shipping issues during the stabilization of a new enterprise resource planning system (ERP) in the U.S. business.
The company reported an improved liquidity position with approximately $503 million of cash, cash equivalents and availability under its credit facility. The company’s cash position reflected strong operating cash flows in the quarter. Inventory was down $29 million compared to the end of last year.
“We are focusing on the fundamentals and operating our business with discipline and rigor in this challenging retail environment,” said John Anderson, president and chief executive officer. “Our cash flow is robust and our liquidity position will support the business and our investment in strategic initiatives. We acquired 73 outlet stores in the United States this week, complementing our existing retail network and building our brands. We continue to focus on strengthening our business during these difficult times so we can capitalize on our position when the economy improves.”
Second-Quarter 2009 Highlights
- Gross profit in the second quarter decreased to $415 million compared with $437 million for the same period in 2008, primarily due to the effect of currencies. Gross margin for the quarter was 45.9 percent compared with 46.7 percent in the same quarter of 2008. Gross margin was adversely impacted by currencies but benefited from lower inventory markdowns.
- Selling, general and administrative (SG&A) expenses for the second quarter decreased to $359 million from $386 million in the same period of 2008. The reduction in SG&A expense was largely driven by the effects of currency. The company also incurred lower ERP-related, distribution and marketing costs, offset by higher selling costs associated with additional company-operated stores and increased pension expense.
- Operating income for the second quarter increased to $56 million compared with $52 million for the same period of 2008, primarily reflecting the lower SG&A expenses
Regional Overview
Regional Net Revenues for the quarter were as follows:
| | | | % Increase (Decrease) |
| Net Revenues ($ millions) | May 31, 2009 | May 25, 2008 | As Reported | Constant Currency |
| Americas | $518 | $477 | 8% | 12% |
| Europe | $221 | $268 | (17)% | 1% |
| Asia Pacific | $166 | $191 | (13%) | (6)% |
- The increase in net revenues in the Americas region primarily reflected lower sales in the second quarter of 2008 due to the shipping issues related to the U.S. ERP system stabilization. This increase was partially offset by declines in net sales in the 2009 period due to the bankruptcy of a significant U.S. customer in the third quarter of last year.
- Net revenues in Europe decreased on a reported basis and were stable excluding the impact of currency. Weaker wholesale performance in the company’s mature markets, reflecting the declining retail environment in the region, was offset by sales from new company-operated stores.
- Net revenues in Asia Pacific decreased on both a reported and constant currency basis. Lower net sales in wholesale channels in mature markets reflected the continuing impact of the slowing global economy, particularly in Japan. The decline was partially offset by increased sales from continued retail store expansion in developing markets.
Balance Sheet and Cash Flow
The company ended the second quarter with cash and cash equivalents of $270 million and available liquidity of $233 million under the company’s credit facility. Cash provided by operating activities was $159 million for the three-month period, compared with $121 million for the same period in 2008. Net debt at the end of the quarter was $1.6 billion compared to $1.8 billion at the end of the second quarter of 2008.
Investor Conference Call
The company’s second-quarter 2009 investor conference call will be available through a live audio Webcast at www.levistrauss.com/Financials/EarningsWebcasts.aspx today, July 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 July 21, 2009 at 800-642-1687 in the United States and Canada, or 706-645-9291 internationally; I.D. No. 16477579.
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