For the third quarter of fiscal 2017, revenue of Levi Strauss & Co. was up 7 per cent on a reported basis. The company’s direct-to-consumer revenue increased 16 per cent on performance and expansion of the retail network, and e-commerce growth. The wholesale revenue was also recorded up at 4 per cent primarily reflecting growth in Europe.
The company’s gross profit for the reported period grew 11 per cent and gross margin expanded to 51.8 per cent primarily showcasing the margin benefit from revenue growth in the direct-to-consumer channel and international business. Operating income also grew one per cent for the third quarter compared to the same quarter of fiscal 2016 as higher revenue and gross margins were partially offset by the stock-based compensation expense charge recorded this quarter, as well as the prior year vendor dispute resolution. The net income declined $10 mn reflecting FX losses on hedging contracts of $19 mn, primarily driven by the weakening of the US dollar against most foreign currencies. “We are pleased with our progress this quarter and year-to-date. Our strategies are working and, despite the challenging retail environment, we are achieving profitable growth,” said Chip Bergh, President and Chief Executive Officer. “Based on the strength of our increasingly diversified business and confidence in our brands, we are investing in incremental advertising and media across both the Levi’s and Dockers brands in the fourth quarter.”
Selling, general and administrative expenses (SG&A) were $510 mn compared with $449 mn in the same quarter of fiscal 2016. SG&A as a per cent of revenue was 40.2 per cent compared with 37.8 per cent of revenues in the same quarter of fiscal 2016. Higher SG&A primarily reflects higher selling expenses associated with the expansion of the companyoperated retail network and investments in the wholesale business, as well as the recognition of a $7 mn benefit from the resolution of a vendor dispute settled in the prior-year period. In addition, an $11 mn noncash stock compensation expense was recognised this quarter to correct the timing of stock compensation accruals for retirement eligible employees.