REPORT_ Announcing its financial results for the fourth quarter and fiscal year ended November 24, 2013, Levi Strauss said that its fourth-quarter revenues were flat to prior year on a reported basis, and excluding the impact of currency, fourth-quarter net revenues increased slightly. Full-year net revenues increased two percent on a reported and constant currency basis due to continued growth in the Americas region and the strength of the Levi’s Men’s business.
Despite the lower net income in the fourth quarter, full-year net income increased 59 percent reflecting gross margin improvement. And due to the timing of the company’s fiscal year-end, the Black Friday sales week occurred after the fourth quarter closed. Fourth-quarter net income declined due to a slightly lower gross margin, higher seasonal advertising spend and a 2012 tax benefit.
“Overall, we are pleased with the progress we made in 2013. We grew the top- and bottom-line, generated significant cash from operations and further strengthened the balance sheet by reducing our debt,” opined Chip Bergh, President and Chief Executive Officer, adding, “In 2014 we will continue to focus on growing the business over the long term by driving our profitable core business, addressing key opportunities to build a more balanced portfolio, and improving our retail operations, while at the same time reducing our controllable costs.”
Gross profit for the fiscal year 2013 was 2,351 million dollars compared with 2,199 million dollars in 2012. Gross margin improved to 50 percent of revenues in 2013 compared to 48 percent in 2012. Gross margin improved primarily due to the benefit of the lower cost of cotton in the products the San Francisco-based company sold in the first half of 2013. Gross margin also improved due to favorable currency effects of approximately 25 million dollars, and an unfavorable impact of approximately 32 million dollars in customer support and markdown charges taken in 2012 to exit the Denizen brand in Asia Pacific. Operating income for 2013 was 466 million dollars compared to 334 million dollars the prior year.
Gross profit in the fourth quarter was 637 million dollars compared with 649 million dollars for the same period in 2012. Gross margin for the fourth quarter was 49 percent of net revenues compared with 50 percent of net revenues in the fourth quarter of 2012. Operating income for the fourth quarter declined to 66 million dollars from 91 million dollars for the same period in 2012, reflecting the lower gross margin and higher advertising.
In the Americas, the net revenues increase was driven by higher Levi’s brand and Dockers brand men’s wholesale revenues, partially offset by the decline in wholesale revenues from the Levi’s brand women’s business. Retail sales were down compared to the prior year due to the timing of the Black Friday week in 2013. Net revenues in Europe reflected declining sales to traditional wholesale channels and franchisees. The net revenues increase in Asia Pacific primarily reflected promotional activity and the launch of the Levi’s brand Revel collection. Underlying retail conditions in most markets in the region remain challenging. The increase in operating income reflected the phase-out of Denizen in the region.