LEVI STRAUSS & CO. ANNOUNCES SECOND-QUARTER 2015 FINANCIAL RESULTS
Constant-Currency Revenue Growth Offset By Unfavorable Exchange Rates
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Net revenues declined six percent on a reported basis and grew one percent on a constant-currency basis. Lower sales at wholesale, primarily in the Americas, were offset by increased sales from the retail network in Europe and Asia. Net income was impacted by a $14 million loss on debt retirement in conjunction with the April refinancing of notes scheduled to mature in 2020. Adjusted EBIT declined thirty-two percent on a reported basis and twenty percent on a constant-currency basis primarily reflecting increased advertising spend and investment in the company's direct-to-consumer channels. “In an environment that continues to be challenging, we were pleased to grow second quarter revenues on a constant-currency basis, due to our strong results in Europe and Asia,” said Chip Bergh, president and chief executive officer. “We continue to focus on what we can control, and make investments to generate consumer demand. As we move into the second half of 2015, we remain confident in our ability to grow full-year sales and adjusted EBIT on a currency-neutral basis, and look forward to the full global reset of our Levi's® women's product line.”
Second-Quarter 2015 Highlights
On a reported basis, gross profit in the second quarter declined to $500 million compared with $530 million for the
Selling, general and administrative
(SG&A) expenses for the second quarter of $450 million grew $4 million compared
Adjusted EBIT, which excludes the charges associated with the company’s global productivity initiative and debt
• Net revenues in the Americas
declined primarily due to the loss of women’s Dockers® products at wholesale
Cash Flow and Balance Sheet
At May 31, 2015, cash and cash equivalents of $285 million were complemented by $533 million available under the company's revolving credit facility, resulting in a total liquidity position of approximately $818 million. Net debt at the end of the second quarter remained $0.9 billion. Free cash flow through the second quarter of 2015 was $8 million.
Global Productivity Initiative
Restructuring and related charges associated with the company's global productivity initiative primarily reflect severance benefit
costs, pension plan curtailment gains and losses, other expenses associated with staffing reductions, and consulting fees primarily
related to centrally-led cost-savings and procurement projects, as well as transition costs associated with the decision to outsource
certain global business service activities. Actions taken to date for the global productivity initiative are expected to deliver net
annualized savings of $125 – $150 million, relative to the cost structure of the company and foreign currency exchange rates
prior to the commencement of the initiative. The company anticipates that it will incur additional restructuring charges related
to the global productivity initiative, and now expects that the majority of the related actions will be implemented by the end of
2016. The company continues to believe that upon completion it will realize net annualized benefits of $175 – 200 million,
relative to the cost structure and profitability of the company and foreign currency exchange rates prior to the commencement
The company expects additional savings in future periods to come from streamlining its planning and go-to-market strategies, implementing efficiencies across its retail, supply chain and distribution network, and pursuing improved procurement practices.