Levi Strauss & Co. Announces First-Quarter 2012 Financial Results

SAN FRANCISCO (April 10, 2012) – Levi Strauss & Co. (LS&Co.) announced financial results today for the first quarter ended February 26, 2012. 

Highlights include:

Net revenues increased 4 percent on a reported basis and 5 percent on a constant-currency basis, primarily due to the growth of the Levi’s® brand, from the price increases we have implemented in response to rising cotton costs, and the global expansion and performance of the company’s brand-dedicated retail network.

First quarter net income attributable to the company was $49 million compared with $41 million in the first quarter of 2011.   Higher net income resulted from revenue growth and lower advertising expenses, which were partially offset by lower gross margins reflecting the adverse impact of cotton.  

“We had a good start to the fiscal year.  We’re pleased with our performance in the first quarter, and we delivered these results despite the pressure of high-priced cotton,” said Chip Bergh, president and chief executive officer.  “Conditions remain challenging in some parts of the world. As we move through the remainder of the year our focus will be driving profitable growth through the core pillars of our business.”

First-Quarter 2012 Highlights

§  Gross profit in the first quarter decreased to $549 million compared with $558 million for the same period in 2011.  Gross margin for the first quarter was 47.1 percent of revenues compared with 49.8 percent of revenues in the same quarter of 2011.  The decline in gross margin was primarily due to higher-priced cotton, which our price increases did not fully cover. 

• Selling, general and administrative expenses (SG&A) for the first quarter decreased to $439 million from $459 million in the same period of 2011.  The decline in SG&A was primarily driven by lower advertising, reflecting timing shifts as well as spend reductions in some markets. 

• Operating income of $110 million grew from $99 million the prior year as the decline in gross margin was more than offset by the lower advertising expenses and the increase in net revenues.

Regional Overview

Regional net revenues for the quarter were as follows:

• Higher net revenues in the Americas primarily reflect higher Levi’s® brand sales, mainly due to price increases, which were partially offset by related volume declines in certain wholesale customers. Higher revenues also reflect increased sales of our Signature brand products and the addition of Denizen® sales in the region.

• Net revenues in Europe decreased primarily due to a lower volume of sales to both franchisee stores and to the traditional wholesale channels, reflecting the ongoing depressed retail environment, most notably in southern Europe.  Net revenues of the company-operated retail network grew, reflecting improved performance of our stores.

• Net revenues in Asia Pacific increased primarily due to price increases in the Levi’s® brand, which were partially offset by volume declines.  Revenue growth also reflects continued expansion of the company’s brand-dedicated retail network in the region.   

Cash Flow and Balance Sheet

At February 26, 2012, cash and cash equivalents were $238 million, complemented by $555 million available under the company’s revolving credit facility.  Cash provided by operating activities was $105 million, compared with $46 million for the same period in 2011, reflecting higher trade receivable collections.  The increased cash from operations yielded a reduction in net debt, which declined to $1.7 billion at the end of the first quarter of 2012, compared to $1.8 billion at the end of 2011. 

“Given the challenges we anticipated in the first half of 2012, we’re pleased with our strong cash flow and our improved working capital position,” said Blake Jorgensen, chief financial officer of Levi Strauss & Co.  

Investor Conference Call

The company’s first-quarter 2012 investor conference call will be available through a live audio webcast at http://us.meeting-stream.com/levistraussco_041211today, April 10, 2012, at 1 p.m. Pacific / 4 p.m. Eastern.  A replay is available on the website the same day and will be archived for one month.  A telephone replay also is available through April 16, 2012, at 800-642-1687.

Forward Looking Statement

This news release contains, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  We have based these forward-looking statements on our current assumptions, expectations and projections about future events.  We use words like “believe,” “will,” “so we can,” “when,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words.  These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements.  Investors should consider the information contained in our filings with the U.S.  Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year 2011, especially in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections.  Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements.  In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this news release may not occur.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this news release.  We are not under any obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this news release to reflect circumstances existing after the date of this news release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

About Levi Strauss & Co.

Levi Strauss & Co. is one of the world’s largest brand-name apparel companies and a global leader in jeanswear.  The company designs and markets jeans, casual wear and related accessories for men, women and children under the Levi’s®, Dockers®, Signature by Levi Strauss & Co.™, and Denizen® brands.  Its products are sold in more than 110 countries worldwide through a combination of chain retailers, department stores, online sites, and a global footprint of more than 2,300 franchised and company-operated stores.  Levi Strauss & Co.’s reported fiscal 2011 net revenues were $4.8 billion.  For more information, go to http://levistrauss.com.

Investor Contact:
Chris Ogle
Levi Strauss & Co.
(800) 438-0349
Investor-relations@levi.com

Media Contact:
Kris Marubio
Levi Strauss & Co.
(415) 501-6709
kmarubio@levi.com

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