Second quarter profit at jeans giant Levi Strauss & Co soared by 50% on the back of a tax benefit, but revenues slipped by 1% on lower European and US sales of its Signature branded line the company said today (11 July).

The San Francisco-based company posted a quarterly profit of $40m, helped by a $32m income tax benefit, the early closure of a debt, and lower interest expenses. 
But net revenues for the period ended 28 May edged down to US$953m from $962m for the same quarter in 2005.

However, the privately-owned company said a 4.3% drop in US demand for its low-cost Signature jeans line was offset by increased US Dockers and Levi's sales and continuing growth in its Asia Pacific business. 

US sales of Levi's brand jeans rose 2.1% to $251.9m from $246.6m in the second quarter, while US Dockers sales were up 11% to $177.2m from $159.4m.

"We made good progress during the quarter," said chief executive officer Phil Marineau.  "Revenues stabilised and our net income improved.

"Looking at the business regionally, I'm particularly pleased with the growth in our US business. We continue to transform our European business, and I'm optimistic that the region's revenue trends will improve during the balance of the year."

He added that the Asia Pacific business "continued its strong revenue and profit performance."
Gross profit fell by 4% to $438m from $455m in the second quarter of 2005.

Operating income for the quarter decreased by $30m to $115m compared to $145m in the second quarter of 2005. The decrease was primarily driven by lower operating income in Europe, partially offset by increased operating income in the US Levi Strauss Signature, Asia Pacific and Mexico/Canada businesses the company said in a statement.

"I'm encouraged by our growth in North America and Asia and our progress in Europe," said Hans Ploos van Amstel, chief financial officer. 

"We continue to deliver strong margins while investing in our business. This, together with our working capital improvement, continues to yield strong free cashflow, which remains our key focus."

Earlier this year Levi Strauss managed to halt an eight-year sales slide, but spoke of a "challenging" 2006.

The company last week announced the retirement of chief executive Philo Martineau at the end of the year.

By Leonie Barrie.