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Business REPORT

Levi Strauss posts flat reported revenues in Q2

By Prachi Singh

12 Jul 2016

Levi Strauss net revenues for the second quarter ended May 29, 2016 were flat on a reported basis and grew one percent excluding 14 million dollars in unfavorable currency translation effects. Higher revenues primarily reflected increased constant-currency direct-to-consumer sales, which grew low double-digits for the second quarter, on performance and expansion of the retail network as well as ecommerce growth.

“In the second quarter, we offset the impact of a challenging US wholesale environment with growth in our direct-to-consumer and international businesses,” said Chip Bergh, President and CEO, adding, “Looking forward, as we execute our profitable growth strategies we will continue to focus on what we can control, and we remain committed to delivering our priorities and financial objectives for the full year.”

Second-quarter financial highlights

Constant-currency wholesale revenues declined low single-digits for the quarter. Second-quarter net income grew 163 percent primarily reflecting a decline in charges related to the company’s productivity initiative and a debt extinguishment loss recorded in the prior year. Second quarter Adjusted EBIT was roughly flat to prior year.

On a reported basis, gross profit in the second quarter grew to 517 million dollars compared with 500 million dollars for the same quarter of 2015, despite unfavourable currency translation effects of approximately five million dollars. Gross margin grew to 51.1 percent of revenues compared with 49.4 percent of revenues in the same quarter of 2015, primarily due to international and direct-to-consumer sales growth.

The company had 66 more company-operated stores at the end of the second quarter of 2016 than it did at the end of the second quarter of 2015.

Currency headwinds impact net revenues

In the Americas, excluding currency effects, net revenues declined four percent, as currency translation unfavorably impacted net revenues by eight million dollars. Direct-to-consumer revenues grew for the region, while US wholesale revenues declined.

In Europe, currency translation had no significant impact to net revenues or operating income. Net revenues grew eight percent reflecting direct-to-consumer growth from performance and expansion, and operating income was up twelve percent due to the region's higher net revenues and improved gross margin. In Asia, excluding currency effects, net revenues grew twelve percent, as currency translation unfavourably impacted net revenues by six million dollars. Revenue growth primarily reflected strong performance and expansion of the company-operated retail network.