Levi’s Loss Narrows; Sales Continue to Fall

Levi Strauss & Co. said Thursday that its loss narrowed in its fiscal fourth quarter, but the jeans maker nevertheless suffered an eighth consecutive year of declining sales.

The San Francisco-based company posted a net loss of $19 million in the three months ended Nov. 28, compared with $245 million a year earlier.

Levi’s fourth-quarter sales totaled $1.16 billion, down 3% from $1.2 billion a year earlier. The company said sales would have dropped 7% if not for a lift that it received overseas from the weak U.S. dollar.

Part of the sales decline stemmed from the 2004 quarter having one fewer week than the 2003 period.

Levi is privately held but discloses its financial results because some of its debt is publicly traded.

The fourth-quarter loss, driven by a sharp increase in advertising expense, masked the gains that Levi realized during the year by shedding workers, tightening its inventory control and curtailing sales of clothing with low profit margins.

Continuing several years of massive layoffs, Levi eliminated 3,450 jobs in 2004 -- a 28% workforce reduction that left the company with 8,850 employees at year-end.

For the full year, Levi earned $30.4 million, a reversal from a 2003 loss of $349 million that prompted the company’s board to hire turnaround specialist Alvarez & Marsal to stop the bleeding.

Levi’s sales continued to shrivel last year, although the latest decline in the company’s prolonged slump was barely noticeable.

Sales for the year totaled $4.07 billion, slipping from $4.09 billion in 2003. If not for favorable currency fluctuations, Levi said its 2004 sales would have decreased by 4%.

Alvarez & Marsal consultant Jim Fogarty believes that the company’s financial rehabilitation is largely complete, clearing the way for him to step aside as Levi’s interim chief financial officer early next month.

“From my standpoint, mission accomplished,” Fogarty said during a Thursday conference call with investors who own Levi bonds.

Levi has paid Fogarty $525 an hour since his arrival as CFO in late 2003. The company also is giving Alvarez & Marsal a $2.5-million bonus for its turnaround work, according to an annual report filed Thursday with the Securities and Exchange Commission.

Levi Chief Executive Phil Marineau, who has been struggling to revive the company since his arrival more than five years ago, said he was more interested in bolstering profit than boosting sales.

“Our No. 1 objective is to improve our competitive position,” Marineau said. “We feel very good about where we are right now.”

Levi’s board seems pleased with Marineau too. The company paid the executive $6.3 million in salary and bonuses last year, a raise from $1.2 million in 2003, according to the SEC filing.