SAN FRANCISCO (April 12, 2011) – Levi Strauss & Co. (LS&Co.) today announced financial results for the first quarter ended February 27, 2011 and filed its first quarter 2011 results on Form 10-Q with the Securities and Exchange Commission.
Three Months Ended
February 27, 2011
February 28, 2010
Net revenues increased eight percent on both reported and constant-currency bases, reflecting sales growth in each region. Increased net revenues were primarily in the Levi’s® brand through global expansion and performance of the company’s brand-dedicated retail network and performance at wholesale in the Americas.
First quarter net income attributable to the company was $41 million, a decline of $16 million compared with last year. Net income declined primarily due to a decline in the company’s gross margin and a non-operating charge from the company’s foreign exchange management activities.
“We made progress executing against our strategic initiatives and drove sales growth across all regions in the first quarter,” said John Anderson, president and chief executive officer. “We continued to offer consumers innovative products by introducing the fourth revolutionary fit for women in our Levi’s® Curve ID collection as well as launching Levi’s® Water<Less™ jeans, which are setting a new green standard. In addition, our Dockers® team expanded its distribution channel to reach more consumers in a wider range of stores.”
In a separate release today, the company announced the future launch of Denizen™ in North America.
“During the quarter, we also continued the rollout of our newest brand Denizen™ to address the growing markets in China and India,” added Anderson. “With more than 100 Denizen™ stores in Asia, we’re now looking forward to bringing the brand to consumers in the United States and Mexico this summer.”
First-Quarter 2011 Highlights
Gross profit in the first quarter increased to $558 million compared with $533 million for the same period in 2010. Gross margin for the first quarter was 49.8 percent of revenues compared with 51.5 percent of revenues in the same quarter of 2010. Decline in gross margin was primarily due to higher sales allowances and discounts in both the Levi’s® and Dockers® brands to increase sales and manage inventory. Gross margin benefited from increased revenue contribution from the company’s retail stores.
Selling, general and administrative (SG&A) expenses for the first quarter increased in-line with the growth in net revenues, to $459 million from $426 million in the same period of 2010. Higher SG&A was primarily due to additional selling expenses related to the expansion of the company-operated retail operations.
Operating income declined from $107 million to $99 million as benefits from the increase in net revenues were offset by the lower gross margin and continued investment in the company’s retail network.
Regional net revenues for the quarter were as follows:
% Increase (Decrease)
Net Revenues($ millions)
February 27, 2011
February 28, 2010
Higher net revenues in the Americas were due to the Levi’s® brand, which had higher sales in both the company’s retail stores as well as the wholesale channel. In addition, online revenue grew.
Net revenues in Europe increased due to the expansion and improved performance of the company-operated retail network and higher sales to franchised stores. The sales growth reflected the success of the Levi’s® Curve ID collection for women.
Net revenues in Asia Pacific increased primarily due to the continued expansion of the company’s brand-dedicated retail network in China and India, as well as other emerging markets.
Cash Flow and Balance Sheet
At February 27, 2011, cash and cash equivalents were $249 million, complemented by $298 million available under the company’s revolving credit facility. Cash provided by operating activities was $46 million, compared with $76 million for the same period in 2010, reflecting the company’s inventory build and an increased contribution to its pension plans. During the first quarter of 2011, the company paid a $20 million dividend; in 2010, the company’s dividend payment of $20 million was made in the second quarter. Net debt at the end of the first quarter of 2011 was $1.63 billion, compared to $1.59 billion at the end of 2010.
“We’re pleased with the progress we made in the first quarter towards driving long-term growth,” said Blake Jorgensen, chief financial officer. “Looking ahead, we’re focused on investing behind our strategic initiatives, as we navigate challenging conditions for the apparel industry.”
Investor Conference Call
The company’s first-quarter 2011 investor conference call will be available through a live audio Webcast at http://us.meeting-stream.com/levistraussco_041211today, April 12, 2011, at 1 p.m. Pacific / 4 p.m. Eastern. 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 18, 2011 at 800-642-1687 in the United States and Canada, or 706-645-9291 internationally; I.D. No.55616794.
Forward Looking Statement
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,” “will,” “so we can,” “when,” “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 2010, especially in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections. 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.
About Levi Strauss & Co.
Levi Strauss & Co. is one of the world’s largest brand-name apparel companies and a global leader in jeanswear. The company designs and markets jeans, casual wear and related accessories for men, women and children under the Levi’s®, Dockers®, Signature by Levi Strauss & Co.™, and Denizen™ brands. Its products are sold in more than 110 countries worldwide through a combination of chain retailers, department stores, online sites, and franchised and company-owned stores. As of February 27, 2011, the company operated 482 stores within 31 countries. Levi Strauss & Co.’s reported fiscal 2010 net revenues were $4.4 billion. For more information, go to http://levistrauss.com.
Levi Strauss & Co.
Levi Strauss & Co.