Levi’s Sales Continue Decline in 1st Quarter
Levi Strauss & Co. said Tuesday that lower interest costs and foreign exchange boosted quarterly net income, but operating profit declined as sales fell just as they have for the last five years.
The privately held company, one of the world’s largest apparel makers, said sales dipped 6% to $935million in its fiscal first quarter, ended Feb. 24, from $996 million a year ago. Net income, including taxes and interest, rose 47% to $44 million. But operating income fell 13% to $106 million.
Even with the decline, Levi Strauss Chief Executive Phil Marineau said the firm’s turnaround plan was on track, reiterating that the company would stabilize sales by the end of its fiscal year and see its business grow during 2003.
“We are in good shape relative to the plans that we set for ourselves and the turnaround is on track,” Marineau said. “The second quarter will be bumpy but we don’t expect it to get in the way of the overall results for the year.”
The results come as the San Francisco-based company, which reports earnings because of its outstanding corporate debt, battles to restore its faded image in the face of competition from other brands that have cut into a once-dominant market share.
In the bid to reposition its clothing for younger customers, Marineau said, the firm will do away with some fits and styles to make it less confusing for consumers to decide what kind of Levi’s to buy.
The company also will try to add a little zip to the brand with a new stain-resistant khaki, Superlow stretch jeans for women and low-rise jeans for men.
Analysts agreed that the company faces a potentially rough ride in the first part of this year but said the Levi Strauss management team was on the right track.
“The company is moving in the right direction to achieving its stabilization initiatives, and investors should not be distracted by short-term hiccups,” said James-Scott Wong, an analyst at Barclays Capital in London.
The firm also hopes the recent launch of low-rise jeans for men and women in Asia will beef up revenue where sales dipped 4.7% to $73.3 million.
Although company officials were heartened by rising sales in Europe and Asia on a constant currency basis, the main problem for the firm seems to be in the Americas, where sales fell 9.2%, to $601million.
Levi Strauss aims to emulate the model it pioneered in Europe--where the company said sales rose for the fourth consecutive quarter--by focusing on the most popular fits and styles and improving retail presentation.
This means, for example, getting rid of the traditional “wall of jeans” to display clothing more prominently both in retail outlets and Levi Strauss’ own stores--a revamping CEO Marineau said has sparked better sales.
The company said its debt was largely unchanged during the quarter at $1.96 billion. Marineau said the firm is committed to using free cash flow to pay down debt, with a goal of getting the firm back to an investment-grade rating in the next few years.
