Levi Strauss improves cash flow from operations, invests in growth

By Jennifer Lanning Drey

Portland, Ore., July 14 - Levi Strauss & Co. showed a $38 million improvement in cash flow generated from operating activities in the second quarter, as compared to the same period in 2008, resulting from a heightened focus on inventory management and cost controls, Heidi Manes, the company's controller, said Tuesday.

The improvement offset a decrease in cash collections driven by lower revenues, Manes, who served as Levi Strauss' interim chief financial officer for the quarter, said during the call.

"Our operating performance reflects strong cash flow in a challenging economic environment and as we invest in strategic initiatives, we'll continue to focus on controlling costs and managing inventories," Manes said.

Second-quarter cash provided by operating activities was $159 million, compared with $121 million for the same period in 2008.

The company ended the second quarter with $270 million of cash and $233 million available under its revolving credit facility.

Levi Strauss' second-quarter results reflected a challenging global economy and the adverse effect of currency exchange rates compared to the prior year, Manes said during the call.

Net revenues were down 3% in the quarter on a reported basis but up 5% on a constant-currency basis, as compared to the same period in 2008. The figures put year-to-date net revenues down 8% versus the first six months of 2008, or 1% on a constant-currency basis.

"We continued to face a very challenging global economy during the second quarter. In this environment, we are focusing on the fundamentals and operating our business with discipline and rigor," John Anderson, chief executive officer of Levi Strauss, said during the call.

Net debt was $1.6 billion at May 31, compared to $1.8 billion on the same date in 2008.

Continued investments

Despite the economic slowdown, Levi Strauss continues to invest in growth, as evidenced by its recent $72 million acquisition of 73 U.S. Levi and Dockers outlet stores previously operated by bankrupt Anchor Blue Retail Group under a license agreement, Robert Hanson, president of Levi Strauss Americas, said during the call.

"This complements our retail store portfolio in the United States and is a natural next step in our long-term growth strategy," he said.

Hanson later added that retail locations continue to be an important piece of Levi Strauss' growth plans, although the company will be selective and prudent about opening new stores.

"2009 will continue to be a very challenging year for the Americas, but we feel our investment in our brands and our retail store network will help us weather the tough market conditions," he said.

Levi Strauss is a San Francisco-based clothing company.

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