×

Pricier Jeans Help Boost Levi Strauss Quarter Profit 61%

A group of girls all wearing jeans walk in front of the Levi's store on Union Square in San Francisco, Tuesday, April 10, 2007. Levi Strauss & Co. is expected to release quarterly earnings on Tuesday, April 10, 2007. (AP Photo/Eric Risberg)
Eric Risberg
A group of girls all wearing jeans walk in front of the Levi's store on Union Square in San Francisco, Tuesday, April 10, 2007. Levi Strauss & Co. is expected to release quarterly earnings on Tuesday, April 10, 2007. (AP Photo/Eric Risberg)

Levi Strauss & Co. reported a 61% rise in quarterly net profit on Tuesday, as higher-priced denim and apparel boosted sales for the iconic brand.

The manufacturer, whose famous name dates back to the California Gold Rush, has been making more premium denim in the face of a host of global competitors, adding premium retail accounts around the world and opening its own Levi's stores.

"Our premium products are doing well with consumers in many markets," said Chief Executive John Anderson in a statement.

Net profit in the first quarter rose to $87 million from $54 million in the year-ago period. Total sales rose 7% to $1.04 billion, the privately owned San Francisco-based company said.

Last year, the company managed to turn around years of declining sales. The sales turnaround followed a major restructuring at the company that included layoffs and moving domestic manufacturing off-shore.

But challenges remain in Japan and with the company's low-cost Signature brand, which has lost shelf space at Wal-Mart Stores , Anderson said.

Sales rose the most in the company's most important region, North America. Sales in the region, which includes the United States, Canada and Mexico, rose 7%, driven by strength in men's Levi's products with higher retail prices. The brand has proven popular with younger male customers and boys, Robert Hanson, president of the North America business, said during a conference call with analysts.

The company recently began selling Levi's at PacSun stores, owned by Pacific Sunwear of California -- the largest surf-inspired retailer in the U.S.. That business was showing "good progress," Anderson told Reuters.

In Europe, sales rose 10%, but excluding the benefit of a weak dollar, sales rose 1%. "We're selling better products at higher prices," Anderson said of the European business, which saw weak demand for the bulk of fiscal 2006.

Sales in the Asia-Pacific region rose 4%, boosted by a 60% gain in China.

But product and marketing misses in Japan -- Levi Strauss was late to offer skinny jeans there last year -- have hurt sales in that country. Anderson said it would take time before that business turned around.

Anderson also characterized the company's Signature line as a "work in progress." Retailers such as Wal-Mart and Target have cut back on the line in order to promote their own private-label brands, but Levi Strauss said it is working with the companies to properly position the product. "The mass channel remains important to us," said Hanson.

Operating income rose 11 percent during the quarter, helped by a $25 million benefit-plan curtailment gain related to the closure of a U.S. distribution center, lower interest expense and a lower tax rate, the company said.