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Levi Strauss posts 4 percent revenue growth in Q1

By Prachi Singh

13 Apr 2017

Net revenues at Levi Strauss grew 4 percent on a reported basis and 5 percent excluding 10 million dollars in unfavorable currency translation effects. On a reported basis, the company said, direct-to-consumer revenues grew 10 percent on performance and expansion of the retail network, as well as ecommerce growth.

"Despite the on-going challenges in the industry, I am pleased that we delivered 5 percent currency-neutral growth over a strong Q1 last year," said Chip Bergh, President and CEO in a statement, adding, "We were able to deliver these solid results despite a declining US wholesale business, because of the breadth of our portfolio. Specifically, we grew in all three regions, with particularly outstanding results in Europe; double digit growth in our direct-to-consumer business; and double digit growth on women’s and tops."

Q1 net income declines 9 percent

The company said, wholesale revenues grew 2 percent primarily reflecting growth in Europe. Net income and Adjusted EBIT declined 9 and 11 percent, respectively, which the company said, primarily reflected lower gross margins.

On a reported basis, gross margin was 51.2 percent of revenues compared with 53 percent in the same quarter of fiscal 2016, reflecting an increase in sales allowances, unfavourable transactional impact of currency and slightly higher product costs. These factors were partially offset by the margin benefit from growth in company-operated retail in Europe and Americas.

The company had 51 more company-operated stores at the end of the first quarter of 2017 than it did at the end of the first quarter of 2016. Operating income margin was 10 percent compared with 11 percent in the same quarter of fiscal 2016, primarily reflecting lower gross margins.

Net revenues rose 2 percent in the Americas

In the Americas, excluding unfavourable currency effects of 5 million dollars, net revenues increased 2 percent, reflecting higher revenues in both Mexico and our direct-to-consumer business, partially offset by lower US wholesale revenues. Net revenues in the United States declined slightly, as direct-to-consumer growth was offset by declines at wholesale.

In Europe, excluding unfavourable currency effects of 6 million dollars, net revenues grew 15 percent reflecting strong and broad based growth across all countries and in both direct-to-consumer and wholesale revenues. Operating income increased primarily due to the region's higher net revenues and gross margins, partially offset by higher selling expenses.

In Asia, on a reported and constant currency basis, net revenues grew 2 percent reflecting direct-to-consumer expansion and performance, partially offset by lower franchise and wholesale revenues. Operating income decreased due to lower gross margins and higher investment in retail expansion.

Picture:Facebook/Levi Strauss