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Apr 13, 2011
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Levi Strauss profit falls as cuts prices on Dockers, jeans

By
Reuters
Published
Apr 13, 2011

Apr 12 - Levi Strauss & Co reported a lower quarterly profit as it found itself forced to cut prices on its Dockers khaki pants and Levi's jeans to spur sales.

Shoppers' resistance to paying full price comes at a time Levi Strauss, and other rivals such as Guess Inc, are trying to pass on high cotton costs to customers.

Dockers®
Dockers brand, owned by Levi Strauss & Co

"You're not going to see dramatically lower cotton prices in the next six to 12 months," Chief Financial Officer Blake Jorgensen told Reuters.

Jorgensen said rising gasoline prices are also feeding consumer resistance, particularly for shoppers with modest incomes.

The private company said that first-quarter net income was $40.7 million, down 28 percent from $56.4 million in the year-earlier quarter.

Gross margin was down 1.7 percentage points to 49.8 percent of revenue during the holiday quarter on more discounting that Jorgensen ascribed to the need "to be fairly aggressive" in generating sales and clearing inventory to make room for spring merchandise.

Levi said it also faces more cautious ordering from department store chains such as Macy's Inc, J.C. Penney Co Inc and Kohl's Corp, echoing concerns expressed by Guess when it reported results in March.

Jorgensen recognized that the discounts on Dockers show that Levi Strauss still has a way to go in its effort to reinvent that line of pants.

"The battle with Dockers is we're trying to reignite a category that went stale," Jorgensen said.

Net revenue, which includes sales and licensing revenues, rose 8.3 percent to $1.12 billion during the quarter ended on February 27, helped by a surge in sales in Asia and improving wholesale business in the United States.

In the Americas region, where Levi Strauss gets half its business, revenue rose 9 percent.
European revenue rose 2 percent, or 6 percent on a constant currency basis. Revenue rose 18 percent in Asia, or 12 percent excluding currency fluctuations.

Net debt of $1.63 billion was up from $1.59 billion a year ago.

(Reporting by Phil Wahba, editing by Dave Zimmerman, Gary Hill)

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