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Levi Strauss China under pressure

Franchise woes for Levi Strauss China have impacted on the US parent company’s latest quarterly results.

Continued pressures on the China franchise channel saw third-quarter Asian revenue for US jeans brand Levi Strauss & Co rise a mere 2 per cent, with direct-to-consumer expansion offset by the franchising problems, which also hit operating income. This fell by US$2 million, also because of lower revenues in China.

Asia regional sales fell 17 per cent in the three months to August 27 alone.

Globally, revenue for the quarter to August 27 grew 7 per cent, with gross margin up 180 points to 51.8 per cent. Gross profit grew 11 per cent, but net income declined 10 per cent reflecting foreign-exchange losses primarily driven by the weakening of the US dollar.

“Our strategies are working, and despite the challenging retail environment, we are achieving profitable growth,” says president/CEO Chip Bergh.

Net revenues grew 7 per cent on a reported basis and 6 per cent excluding $11 million in favourable currency conversions. Direct-to-consumer revenues grew 16 per cent on performance and expansion of the retail network, as well as e-commerce growth.

Levi Strauss products are sold in more than 110 countries through a combination of chain retailers, department stores, online sites and a global footprint of about 2900 retail stores and shop-in-shops.

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