Levi Strauss has announced that in its financial results
for the fourth quarter and fiscal year ended November 25, 2012, on a reported basis, fourth-quarter and full-year net revenues declined three percent from the prior year. Excluding the impact of currency, fourth-quarter net revenues declined two percent and full-year net revenues were down less than one percent from the prior year. For both periods, increased sales from company-operated retail stores in the Americas and Europe were offset by the adverse impact of slowing economic conditions in Asia, as well as strategic choices taken during the third quarter to exit certain businesses in the Americas and Asia. Fourth quarter and full-year net income increased 20 percent and four percent from the prior year, respectively, primarily reflecting lower tax expense due to a tax benefit the company recorded in the fourth quarter.
“In 2012, we made some tough choices and executed significant changes to set the company on a path towards driving sustainable profitable growth,” said Chip Bergh, president and chief executive officer, adding, “We have a largely new leadership team, sharper strategies and a new organization model designed to win in the marketplace. We’re focused on driving our profitable core businesses, expanding beyond the core to develop a more balanced portfolio, becoming a best-in-class retailer and making our cost structure more competitive.”
Gross profit in the fourth quarter was 649 million dollars compared with 624 million dollars for the same period in 2011. Gross margin for the fourth quarter was 50 percent of net revenues compared with 46 percent of net revenues in the fourth quarter of 2011. The gross margin improvement reflected increased sales from the company’s retail stores, a decline in sales to lower-margin channels and lower cotton costs.
Selling, general and administrative (SG&A) expenses for the fourth quarter increased to 558 million dollars compared with 532 million dollars in the same period of 2011, primarily reflecting increased advertising activities in some markets and a difference in timing of campaigns. Lower income tax expense, which benefitted net income, resulted from a tax benefit of 27 million dollars that the company recorded in conjunction with reaching an agreement with the State of California on state tax refund claims involving tax years 1986 through 2004.
Gross profit for the fiscal year was 2,199 million dollars compared with 2,292 million dollars in 2011, reflecting unfavourable currency effects and the company’s decision to phase out the Denizen brand in Asia. Gross margin of 48 percent of revenues in 2012 reflected a slight decline from the prior year. Excluding unfavourable currency effects and the impact of the Denizen brand phase-out, gross margin improved due to increased revenue from company-operated stores, the decline in sales to lower-margin channels and the benefit of the lower cost of cotton.