Levi profit up 12% in quarter
Levi Strauss & Co. began its new fiscal year with a 10th straight quarter of higher profit, but the jeans maker’s momentum appeared to be tapering off as the U.S. economy frayed.
The San Francisco-based company said Tuesday that it earned $97.1 million during the three months ended Feb. 24, a 12% improvement from net income of $86.6 million in the same period a year earlier.
Revenue rose 4% to $1.08 billion, primarily because of the weaker dollar and management’s decision to ship some clothing to retailers ahead of schedule.
Although it’s privately owned by the descendants of its founder, Levi Strauss releases its financial results because some of its debt is publicly traded.
Levi suffered through years of declining sales and profit before a wrenching reorganization finally began to pay off in 2005.
The turnaround enabled Levi to produce its most profitable year in more than a decade during 2007, but that performance increasingly is looking as if it will be tough to beat as skittish consumers become more frugal.
“Looking ahead, we expect the operating environment to be tough,” said John Anderson, Levi’s chief executive. Besides facing challenges in the U.S. economy, Anderson cited Japan as another troublesome market for the company.
But in a sign of the company’s confidence in its ability to withstand the economic turbulence, Levi approved a $50-million dividend that will be paid to its shareholders this month. It’s the company’s first dividend since 1995.
Levi’s gains during the first quarter had little to do with increased demand for its clothing.
Lower tax and debt payments accounted for most of the earnings increase. And, if not for the weak dollar, Levi’s revenue would have been unchanged.
The company’s first-quarter sales also received a lift from about $18 million in shipments that were sent to U.S. retailers in February instead of March.
Management accelerated the deliveries to minimize trouble as the company switched over to new software made by SAP.
But the new software still prevented the company from making some U.S. shipments a few weeks ago, and Levi is now scrambling to get back on schedule.
