We are catching up on the Levi Strauss & Co. third quarter earnings report that was released earlier this week.
After some rocky times, the company appears to be heading in the right direction with revenue and profit increasing company-wide, strong growth in both wholesale and retail sales, and a good performance in each major territory in constant currency.
Q3 Financial Results
Net revenue: $1.1 billion, up 7% in constant currency
Gross margin: improved to 50.2% vs. 48.7%
Net income: up 15% to $58 million
Adjusted EBIT was $128 million, an increase of 23% in constant currency
New women’s line
One factor driving the growth, particularly in the U.S., was the launch of a revamped denim line for women.
Executives on the earnings call gave an interesting example that shows how the new line was received. It dropped in August in Levi’s stores in the U.S., and women’s bottoms sales rose double digits that month, even in the sluggish retail environment.
Retail, wholesale results
While sales at the company’s retail stores declined in the U.S., globally, retail sales rose 8%. The increase in retail sales was driven by the addition of more stores in Europe and Asia.
Global wholesale sales rose 7%, driven by growth in the Americas.
CEO Chip Bergh said the company remains on track to meet its goal of growing revenue and adjusted EBIT for the full year in constant currency.
The company does expect store traffic to remain challenging in the fourth quarter in the U.S., and it expects the promotional climate to continue.
Regional results
In the Americas, revenue reached $713 million, up 5% in constant currency.
In Europe, Levi’s recorded revenue of $258 million, currency swings negatively impacted sales by $54 million. In constant currency, revenue rose 12%.
Revenue in Asia totaled $170 million in the quarter, up 9% in constant currency.
Productivity initiative
The company has embarked on a major global productivity initiative and has cut jobs and streamlined functions and purchasing procedures, which is expected to save $125 million to $150 million per year.
More changes are on the way in its planning and go-to-market strategies, with the entire project expected to be complete by the end of 2016. Eventually, Levi’s expects the project to save $175 million to $200 million per year.
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