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New Product Drives Levi’s Net Income Up 15%

Could denim be on the rebound? Driven by new products, retail expansion and marketing initiatives aimed at female consumers, Levi Strauss & Co. reported a 15 percent net income gain for third quarter 2015 to $58 million, compared to $51 million in the same quarter last year.

Wholesale totals increased seven percent, which the company pinned on new product introductions in the Americas, including the Levi’s brand women’s denim collection. Growth in the Americas was complemented by eight percent sales growth in Europe and Asia derived from retail expansion in the regions.

Adjusted EBIT, which excludes the charges associated with the company’s global productivity initiative and debt refinancing, was $128 million, up eight percent from $119 million in the same quarter of 2014, reflecting the higher gross margin and higher constant-currency revenues. On a constant-currency basis, adjusted EBIT increased 23 percent.

Levi’s anticipates that it will incur additional restructuring charges related to its global productivity initiative, a plan launched in 2014 to streamline the company’s product development, supply chain and distribution network, and to generate annual cost savings in the range of $175-200 million. Levi’s now expects that the majority of the related actions will be implemented by the end of 2016.

Gross margin for the quarter grew to 50.2% of revenues compared with 48.7% of revenues in the same period one year ago. The increase was primarily due to lower negotiated product costs and streamlined supply chain operations. SG&A expenses of $455 million were flat compared to third quarter 2014. Operating income of $115 million in the period was up from $105 million in the same quarter of 2014 reflecting higher adjusted EBIT.

“In the third quarter, we were encouraged by the initial response to our new product introductions, as well as the continued strength of our international retail business,” said Chip Bergh, Levi Strauss & Co. president and chief executive officer, in a statement. “Although we expect traffic at retail to remain challenging in the fourth quarter, we are confident in our ability to grow full-year sales and adjusted EBIT on a currency-neutral basis.”