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Direct-to-Consumer and European Sales Boost Levi’s Q2

Levi Strauss & Co. is benefiting from revenue growth in the direct-to-consumer channel, particularly in the U.S., and strong international business.

The denim giant saw its gross margin for the second quarter ended May 28 increase to 52.3% of revenues compared with 51.1% in the same quarter in fiscal 2016. In U.S. wholesale business, lower Dockers revenue offset growth in Levi’s, Signature and Denizen brands. In Europe, net revenues grew 20 percent, reflecting growth across all markets and channels, including exceptional growth in the women’s and tops business, while in Asia, net revenues grew 3 percent on strong direct-to-consumer expansion and brand performance.

Net income fell 43 percent to $18 million primarily due to a $23 million loss on early extinguishment of debt related to debt refinancing activities in the quarter, which will result in a substantial reduction in cost of debt and interest. Adjusted earnings before interest and taxes (EBIT) grew 7 percent to $67 million from $63 million in the year-ago period.

Net revenues increased 6 percent to $1.07 billion from $1.01 billion in the year-ago period. Direct-to-consumer revenues rose 13 percent on performance and expansion of the retail network, as well as e-commerce growth. Wholesale revenues were up 2 percent, primarily reflecting growth in Europe. Levi’s raised its full year 2017 revenue growth guidance to the 2-to-4 percent range.

Levi Strauss & Co. President and CEO Chip Bergh said: “Our business is more diversified than ever before, driven by disciplined execution of our long-term growth strategies, and investments in product innovation and the consumer shopping experience. Our strong year-to-date revenue growth reinforces the benefits of a more balanced portfolio as our women’s, tops, direct-to-consumer and international businesses delivered solid results, despite a slight decline in the U.S. wholesale business.”