Levi's Returns to Black

Levi Strauss returned to profitability in 2004, as company officials said they would focus on boosting cash flow and decreasing its $2.02 billion in debt.


NEW YORK — Levi Strauss & Co. returned to profitability in 2004, as company officials said Thursday their focus would remain on boosting cash flow and paying down the firm’s $2.02 billion debt.

Executives at the San Francisco-based company described the top-line results as “stabilized,” though the $4.07 billion in reported revenue was 0.4 percent below last year’s $4.09 billion and marked Levi’s eighth consecutive year of sales declines.

President and chief executive officer Phil Marineau said 2004 “was a year when, across all fronts, we made substantial progress against our objectives — improving the profitability of the company, stabilizing sales and increasing margins.”

For the year ended Nov. 28, the company posted net income of $30.4 million, which followed a $349.3 million loss a year earlier. For the fourth quarter, Levi’s took a $19 million net loss, compared with a $245 million loss the year before. Sales were $1.16 billion, off 3.4 percent from $1.2 billion the prior year.

Levi’s sales peaked at $7.1 billion in 1996. While the sales drop-off has continued in recent years, the rate of decline has slowed. Marineau said in a phone interview that Levi’s is “not chasing revenue growth at the expense of increased profitability and cash flow.”

He noted that during the year the firm had licensed out several categories of goods that had been produced in-house, such as men’s Red Tab tops, now made by Li & Fung, and also reduced its sales to off-price retailers and wholesale clubs. Both of these moves were efforts to intentionally reduce revenue in favor of improving earnings.

“Our first priority is to enhance profitability and cash flow and to pay down debt,” Marineau said. “Over the next couple of years, that will be our focus.”

Marineau said the reduction of sales to off-price channels was part of a strategic shift to protect Levi’s core business.

“Going forward, we’ll be managing the Levi’s brand in the U.S. as a premium-priced brand, relative to the average price point” in the jeans business, he said. While great attention has been paid to the $100-and-up jeans category in recent years, he noted that the average pair of jeans in the U.S. still sells for around $20, while Levi’s average pair retails for around $28.

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