Levi's describes global consumer challenges

Levi's at Citadium in Paris - SES file photo

Currency shifts are the latest challenge for Levi Strauss & Co. as it continues to restructure its business and adjust to the uncertain consumer climate.

Net revenue declined 6.6% to $1.1 billion in reported currency for the quarter ended March 1. In constant currency, revenue declined 1%.

Lower wholesale and retail sales in the Americas were partially offset by higher sales from company stores in Europe and Asia.




Net income fell 22.9% to $38.3 million.

Many challenges for apparel companies

What caught my eye was the way Levi’s described the challenges facing the business, many of which are similar to those faced by industry companies.

“Consumer discretionary spending, which remains mixed globally, continues to result in a challenging retail environment for us and our customers, characterized by inconsistent traffic patterns and contributing to a generally promotional environment.

“Both our wholesale and retail channels continue to face competition from vertically-integrated specialty stores, fast-fashion retailers, and, increasingly, ecommerce shopping enabled by the proliferation of online technologies, which constitutes an increasing proportion of global apparel sales, particularly around the key holiday selling season. 

“Our domestic and multi-national competitors also continue to expand their global footprints in both brick-and-mortar retail and online.  Given consumers’ increasing focus on value pricing amid the slowly recovering economy, the off-price retail channel remains strong, partially to the detriment of traditional broadline retailers, particularly at the mid-tier. 

“While currency values are in constant flux, the recent appreciation of the U.S. Dollar against various foreign currencies, particularly the Euro, has impacted the global retail environment and will continue to impact our results in the near-term.”

Regional results

The Americas was the worst performing region during the quarter, with revenue falling to $574.1 million, down 7.3% in constant currency.

In Europe, revenue during the quarter was $277.5 million. While in reported currency Europe lost $46 million in revenue due to currency fluctuations, in constant currency, revenue grew 9.1%. Levi’s saw increased revenue from the expansion and performance of its stores in Spain, the UK and Russia.

In Asia, revenue grew to $203.5 million, an increase of 4.5% in constant currency. Promotional activity during Chinese New Year helped boost sales.

Restructuring

The company continues to work on a major restructuring initiative that includes streamlining its planning and go-to-market strategies, implementing efficiencies across its retail, supply chain and distribution network, and improving procurement practices.

Levi’s expects to save $125 million to $150 million annually from the effort.

Long-term strategy

As it works to streamline operations, the company is also focused on its long-term goals of strengthening its brands globally to deliver sustainable profitable growth, generate strong cash flow and reduce debt.

Levi’s plans to do this by:

  • Driving its profitable core business
  • Expanding the reach of its global brands and building a more balanced product portfolio
  • Elevating the performance of its retail channel, including ecommerce
  • Leveraging its global scale to improve our cost structure.

 

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