Levi’s Profit Declines 18%

Levi Strauss & Co.’s fiscal third-quarter profit dropped 18% because of higher income taxes, but sales edged up slightly to put the jeans maker on pace to end an eight-year streak of declining revenue, the company said Tuesday.

Levi, based in San Francisco, said it earned $38.2 million for the three months ended Aug. 28, down from $46.6 million a year earlier. Management attributed the decline to an income tax benefit that lifted last year’s results.

Revenue totaled $1.02 billion, up 2% from $994.6 million last year.

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

The 152-year-old company is controlled by the Haas family -- descendants of Levi Strauss, a Bavarian immigrant who launched one of the world’s best-known brands when he began making sturdy jeans for California gold prospectors.

But the brand’s luster has been fading in the last decade as fashion tastes have shifted and the company’s relatively high manufacturing costs have hurt sales even further as bargain-minded consumers bought cheaper jeans made overseas.

With the help of a turnaround firm, Levi has overhauled its business in the last few years. The reorganization has included thousands of layoffs, the closure of its last U.S. manufacturing plants and the creation of a discount jeans line called Signature that has made steady sales gains since its launch in mid-2003.

The changes have helped position Levi for its first annual sales gain since 1996. Through the first nine months of its fiscal year ending next month, sales totaled $2.97 billion, a 2% increase from the comparable period last year.

Profit during that period rose to $112.3 million, more than double the $49.8 million of a year earlier.

Maintaining that sales pace, though, won’t be easy because gasoline prices appear to be discouraging more customers from buying clothes as they cut corners to pay their higher fuel bills, said Phil Marineau, Levi’s chief executive.

The Signature brand propelled Levi’s growth in the third quarter. U.S. sales totaled $103.3 million, up 18% from a year earlier.

Domestic sales of Levi-branded clothes rose 4% to $344.7 million. Sales of Dockers fell 2% to $162.8 million.