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Silver Lining, Gray Clouds: Levi’s Improves but Outlook Gloomy

Levi’s is reporting a 9.7 percent first-quarter sales gain and a narrowed loss, but ceo Phil Marineau said he’s swimming against the economic tide.

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NEW YORK — Phil Marineau’s latest nightmare is $3 a gallon gas prices.

The president and chief executive officer of Levi Strauss & Co. has been struggling to right the ship of the world’s leading jeans brand, which has seen seven consecutive years of sales declines. With Levi’s reporting a 9.7 percent first-quarter sales increase and a narrowed loss, Marineau said Tuesday he is well aware that he’s trying to turn things around at a time when the macroeconomic tide is against him.

“What is really going on here? Is January, February and March a little wind in the sails or are we going to see a $3 a gallon gas price come in and cut discretionary spending?” he asked rhetorically in a phone interview. “Honestly, we are assuming things are going to be more negative than positive.”

The San Francisco-based company reported Tuesday that, in the quarter ended Feb. 29, it posted a net loss of $2.4 million, which included $54.4 million in pretax restructuring charges. The loss came a year after a $58 million loss, which had been boosted by a $3.1 million reversal of previously taken charges. Sales in the first quarter were $962.3 million, up from $877 million a year earlier. Factoring out fluctuations in currency exchange rates, sales would have gained 3.5 percent.

Levi’s had two business segments to credit for the improved sales performance. One was the rollout over the past year of the mass market Levi Strauss Signature brand, which brought in $93.3 million in sales in the U.S., Europe and Asia in the first quarter, compared with essentially no revenue last year.

On a conference call with debt analysts, Levi’s officials acknowledged that in the U.S., in addition to Wal-Mart and Target stores, the company had started shipping test batches of Signature product to ShopKo and Meijer, the Midwest chain.

Marineau said that with the addition of those chains, “We are nearing full distribution here in the U.S. But there are plenty of other opportunities” overseas, he added, with the brand currently expanding into Canada, France, the U.K., Germany, Japan and Australia.

Scott LaPorta, president of the Levi Strauss Signature brand, added that, after some initial inventory backups last year, from the holiday period through the end of February, the brand had cut its inventory backlog by about 20 percent.
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