Levi Strauss & Co. Announces First-Quarter 2013 Financial Results

Highlights include:

Net revenues decreased 2 percent on both reported and constant-currency bases, due to lower sales in Asia Pacific and the impact from licensing the Levi’s® brand boys business.  First quarter net income increased 117 percent to $107 million compared with $49 million in the first quarter of 2012, driven by a stronger gross margin and improved operating margin.  

“In the first quarter, we generated strong cash flow and posted a higher gross margin and net income, despite slightly lower revenues,” said Chip Bergh, president and chief executive officer. “We’re committed to reducing debt and strengthening the balance sheet.  Our cash flow and a successful debt refinancing we executed after the quarter closed have allowed us to pay down $185 million of our debt this year.”

First-Quarter 2013 Highlights

- Gross profit in the first quarter increased to $592 million compared with $549 million for the same period in 2012.  Gross margin for the first quarter was 52 percent of revenues compared with 47 percent of revenues in the same quarter of 2012.  The gross margin improvement reflected the lower cost of cotton, increased sales from the company’s retail stores and a favorable currency impact.  

- Selling, general and administrative expenses (SG&A) for the first quarter decreased to $410 million from $439 million in the same period of 2012.  The decline in SG&A was primarily driven by lower advertising reflecting shifts in the timing of the company’s campaigns to a later part of the year and lower severance expenses.

- Operating income of $181 million grew from $110 million the prior year due to the higher gross margin and lower SG&A.

Reported regional net revenues and operating income for the quarter were as follows:

Net revenues in the Americas were flat, as increased sales from company-operated Levi’s® retail stores were offset by lower wholesale revenues reflecting the company’s 2012 decision to license the Levi’s® brand boys business.   Higher operating income primarily reflected the region's higher gross margin.

Net revenues in Europe increased, reflecting continued growth from the company-operated retail network; this was partially offset by a decline in traditional wholesale channels, most notably in Southern Europe. Higher operating income primarily reflected the region's lower SG&A and improved gross margin.

Net revenues in Asia Pacific declined, reflecting lower sales at both company-operated retail network and wholesale channels, due to challenging conditions in most markets in the region, most notably China.  Operating income increased, primarily reflecting lower SG&A and the decision to phase out the Denizen® brand in the region.   

Cash Flow and Balance Sheet

At February 24, 2013, cash and cash equivalents of $450 million were complemented by $574 million available under the company’s revolving credit facility, resulting in a total liquidity position of $1.0 billion.  Cash provided by operating activities of $143 million represented a $38 million increase compared with the same period in 2012, reflecting a tax refund and lower pension plan funding.

During the quarter, the company prepaid $50.0 million of its senior term loan due 2014 and paid a $25 million dividend.  Net debt declined to $1.2 billion at the end of the first quarter of 2013, compared to $1.3 billion at the end of 2012. 

Subsequent to quarter close, the company completed an offering of $140 million of 6.875 percent senior notes due 2022 and used the net proceeds along with cash on hand to prepay the remaining $275 million outstanding on the senior term loan due in 2014.

Investor Conference Call

The company’s first-quarter 2013 investor conference call will be available through a live audio webcast at https://us.reg.meeting-stream.com/levistraussco_040913 today, April 9, 2013, 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 15, 2013, 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 2012, 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 approximately 2,300 franchised and company-operated stores. Levi Strauss & Co.’s reported fiscal 2012 net revenues were $4.6 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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