Jeans giant Levi Strauss & Co on Monday reported a nine per cent year-on-year fall in third quarter net profit amid slow sales growth but said it expects sales to pick up during the fourth quarter.

The San Francisco-based company said in a news release net income for the 13 weeks to August 25 fell to $13.7 million from $15m in the year-ago period, with sales up 3.5 per cent at $1.02 billion from $984m in 2001.

Excluding one-time items, income for the latest quarter was $7m. Levi said higher incentive compensation costs, a higher effective tax rate and currency volatility hit its results, but interest expense fell.

"Our positive third-quarter results are driven primarily by new products and effective retail programs," said CEO Phil Marineau. "We're doing what we said we'd do - significantly improving our sales trends in the back half of the year.

"Based on strong retail orders and consumer sales, we're encouraged about the fourth quarter. Despite the sluggish economic and retail conditions worldwide, we're on track to stabilise sales by year-end, positioning us for growth in 2003.

"In the United States, our product innovation is resonating with consumers. The new fits and finishes in the revitalised Levi's jeans line are selling strongly, and the Dockers Go Khaki with Stain Defender also is doing well," he revealed.

"In Europe, where we've grown five out of the last six quarters, we've taken swift action to become more price competitive in our basic jeans. Our Levi's Girls' business is doing well there, and we've received a very good reception to our new jeans wear finishes."

He concluded: "Product innovation, improved retail presentation and marketing programs continue to fuel Asia's growth."

Levi said its total debt at the end of the third quarter was $1.96bn compared to $1.86bn at the end of the second quarter.

Earlier this year, Levi announced plans to close six of its last eight plants in the US and axe up to 3,300 jobs worldwide as part of a major restructuring exercise.

The job cuts represented about 22 per cent of the company's total workforce and included the axing of two factories in Scotland with the loss of around 650 jobs.