Levi Strauss & Co announced that in its financial
results for the first quarter ended February 24, 2013 net revenues decreased 2 percent on both reported and constant-currency bases, due to lower sales in Asia Pacific and the impact from licensing the Levi’s brand boys business.
First quarter net income increased 117 percent to 107 million dollars (Rs 583 crores) compared with 49 million dollars (Rs 267 crores) in the first quarter of 2012, driven by a stronger gross margin and improved operating margin. “In the first quarter, we generated strong cash flow and posted a higher gross margin and net income, despite slightly lower revenues,” said Chip Bergh, president and chief executive officer, adding, “We’re committed to reducing debt and strengthening the balance sheet. Our cash flow and a successful debt refinancing we executed after the quarter closed have allowed us to pay down 185 million dollars (Rs 1,008 crores) of our debt this year.”
Gross profit in the first quarter increased to 592 million dollars (Rs 3,226 crores) compared with 549 million dollars (Rs 2,992 crores) for the same period in 2012. Gross margin for the first quarter was 52 percent of revenues compared with 47 percent of revenues in the same quarter of 2012. The gross margin improvement reflected the lower cost of cotton, increased sales from the company’s retail stores and a favourable currency impact. Operating income of 181 million dollars (Rs 986 crores) grew from 110 million dollars (Rs 599 crores) the prior year due to the higher gross margin and lower SG&A.
Net revenues in the Americas were flat, as increased sales from company-operated Levi’s retail stores were offset by lower wholesale revenues reflecting the company’s 2012 decision to license the Levi’s brand boys business. Net revenues in Europe increased, reflecting continued growth from the company-operated retail network; this was partially offset by a decline in traditional wholesale channels, most notably in Southern Europe. In Asia Pacific, net revenues declined, reflecting lower sales at both company-operated retail network and wholesale channels, due to challenging conditions in most markets in the region, most notably China.