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Oct 14, 2015
By WGSN Insider
Levi’s efforts to tap into athleisure trends are paying off, as the brand booked a 15% increase in third-quarter net profit.
The denim brand said the results were driven by stronger gross margins on the back of streamlining its supply chain, as well as growth in its wholesale and retail businesses across all of its regions. Net income reached $58.1m during the quarter ended August 30, against $50.6m in the same period of the prior year.
It added the gains were down to new product launches, which saw it begin to make inroads with younger consumers by adding more stretch to its denim and more styles with tapered legs.
President and CEO Chip Bergh said the new denim line, which was introduced in August, has sold “through or out” in many of its stores, telling WWD there has been a “resurgence in denim”.
Adjusted earnings before income and taxes increased 8% to $128m, from $119m in the prior year.
Levi’s also attributed the result to new product launches in the Americas, including the new women’s denim collection, as well as the expansion of its retail network in Europe and Asia.
But, currency headwinds did harm the top line. Sales fell 1% to $10.14bn, on a constant currency basis, they rose 7%. In Europe, the currency impact alone dragged down revenue by 10% to $258m. Excluding currency effects in the region sales grew 12%. In Asia, revenue edged down to $170m from $171m, but on a constant-currency basis, they improved by 9%.
Gross margin improved across every region, rising to 50.2% from 48.7% a year earlier. Margins were helped by pricing increases in Europe, including Russia and Mexico, and because its higher-margin international business is growing faster than in the Americas.
Bergh said: “In the third quarter, we were encouraged by the initial response to our new product introductions, as well as the continued strength of our international retail business.”
“Although we expect traffic at retail to remain challenging in the fourth quarter, we are confident in our ability to grow full-year sales and adjusted EBIT on a currency-neutral basis.”
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