Levi Strauss & Co has seen its fourth quarter profit nearly cut in half as rising cotton costs outpaced higher ticket prices.
The San Francisco-based company also said it was hurt by the impact of a tax benefit in the fourth quarter last year, and had to increase sales to the discount channel to manage inventory.
For the three months to November 27, net income fell to $44 million, a drop of 49% on last year’s $86 million, which included a $34 million tax benefit.
Revenues were up 4% to $1.34 billion from $1.29 billion, with growth in all geographic regions.
In the Americas, its largest region, sales rose 4% to $807 million, with higher prices and growth in the Levi’s retail business offsetting a decline in the Dockers brand.
Expansion of the company-operated retail network also helped lift European sales by 2% to $306 million; and Asia Pacific revenues by 6% to $231 million.
But quarterly gross profit fell 3.6% to $624 million from $647 million, and gross margin dropped from 50% to 46% of net revenues.
Operating income for the quarter dropped 22.7% to $92 million from $119 million, which was mainly due to the decline in gross margin, the company said.
For the full year, net income fell 12.1% to $138 million from $157 million, while net revenues were up 7.9% to $4.76 billion.
“In the face of stiff cost and economic headwinds, Levi Strauss & Co grew the top-line for the second year in a row,” said Chip Bergh, president and CEO.
“As we move forward, we need to build on this momentum and on our global scale, strong brands and innovation pipeline, while improving profitability and cash flow to deliver sustainable long-term growth.”
For more fashion and apparel industry news, go to just-style.com
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