Levi Strauss Asia growth slows down

Levi Strauss Asia growth last quarter was solid – but well behind the US and Europe rates.

Higher profit in all three regions reflects improved margins.

Levi Strauss Asia sales were up 9 per cent compared to a 46 per cent rise in Europe and 14 per cent in the Americas. But operating income in Asia rose 13 per cent, while in Europe it surged 79 per cent and in the Americas by 23 per cent.

“The momentum and growth trends we saw in the back half of last year not only continued but accelerated in the first quarter,” says president/CEO Chip Bergh. “Our results clearly show our strategies are working and that the incremental investments we are making in marketing, direct-to-consumer expansion and our more diversified portfolio are paying off.”

Excluding favourable currency effects of US$10 million, net revenues in Asia grew 5 per cent, reflecting direct-to-consumer expansion and performance.

Net revenues overall grew 22 per cent on a reported basis and 16 per cent excluding $55 million in favourable currency translation effects, driven by broad-based brand growth in all regions and channels.

Direct-to-consumer revenues grew 24 per cent on the improved performance and an expansion of the company’s retail network, as well as e-commerce growth. The company had 56 more self-run stores at the end of the first quarter than 12 months earlier.

Net income fell $79 million because of a $136 million provisional non-cash tax charge. Excluding this, adjusted net income was $117 million, nearly double last year’s $60 million.

Gross margin for the first quarter was 54.9 per cent of revenues, compared with 51.2 per cent in the same quarter last year, reflecting the margin benefit from revenue growth in the direct-to-consumer channel and international business, lower product-sourcing costs and favourable currency exchange rates.

Operating income of $174 million was up 61 per cent for the first quarter while operating margin increased to 13 per cent.