From: Reuters
Published April 8, 2008 05:50 PM

Levi Strauss net profit up 12 percent in quarter

By Alexandria Sage

LOS ANGELES (Reuters) - Levi Strauss & Co said on Tuesday that quarterly net profit rose 12 percent, helped by lower interest expense and a lower tax rate, even as the jeans maker acknowledged economic uncertainty in key global markets, including the United States.

The American casual brand said it was pleased with the worldwide performance of its Levi brand but attributed an overall revenue decline in its Americas region to fewer sales of its lower-cost Signature brand and its Dockers brand, best known for khaki pants.

The company, which is privately owned but reports quarterly results due to outstanding debt, reported first-quarter net profit rose to $97 million from $87 million a year earlier.

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Levi Strauss, which also announced a $50 million cash dividend to common shareholders, said that net revenues rose 4 percent in the quarter, helped by a weak dollar. The company sells its jeans and other clothing in over 100 countries.

The company that originated the first blue jeans in the 1800's has been upgrading its product and image as it reduces debt and cuts costs.

Levi Strauss also is launching an updated line of its classic 501 jeans with higher prices as part of a broader strategy to focus on more premium product.

Net revenue rose 4 percent to $1.08 billion from $1.04 billion a year before. On a constant currency basis, revenue was relatively flat.

Chief Executive Officer John Anderson said that the San Francisco-based company was still focused on retail expansion and penetration of global markets despite an "increasingly difficult retail environment."

"We are cautious given the economic uncertainty in the United States and key markets around the world," Anderson said in a statement.

Some 45 percent of the company's sales come from international markets, with emerging markets such as India, China and Brazil fueling strong growth.

Gross margins as a percentage of sales rose to 50.3 percent in the quarter from 48.0 percent, helped by more sales of higher-margin product and improved sourcing.

Lower debt levels and lower average interest rates also helped results in the quarter.

Revenues in Europe and the Asia Pacific region rose 15 percent and 8 percent, respectively, but each rose 3 percent on a currency-neutral basis.

Japan, the company's largest market in Asia, is experiencing weakness at retail, and the company said it expected that market to remain challenging throughout 2008.

In the Americas, revenues fell 2 percent, or 3 percent using constant currency.

The economic slowdown in the United States negatively affected the company's casual sportswear category, such as Dockers, more quickly than its jeans business, said North America President Robert Hanson.

Levi Strauss' Signature line, sold at mass-market chains which are introducing competing, private-label clothing, represents less than 5 percent of the company's total business, but has seen slowing sales since last year.

The company added 10 new retail stores in the quarter.

"We're very pleased with where we are on our retail expansion around the world. It's helping us to build brand equity and revenue," said Chief Financial Officer Hans Ploos van Amstel, who did not provide a target for the number of stores to be opened in 2008.

The company, which reduced its long-term debt by $18 million in the quarter, has a total debt load of $1.95 billion.

(Reporting by Alexandria Sage, editing by Carol Bishopric and Richard Chang)

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