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Levis Financial Analysis
Levis Financial Analysis
Balance Sheet
GENERAL UNDERSTANDING OF BUSINESS OF LEVI
STRAUSS & COMPANY
• Levi Strauss & Co. is one of the world's largest recognized brand-name apparel companies. Its
broad distribution reflects the brand's appeal across consumers of all ages and lifestyles.
• It was founded in San Francisco, California, in 1853 and incorporated in Delaware in 1971. It
conduct its operations outside the United States through foreign subsidiaries owned directly
or indirectly by Levi Strauss & Co. it has headquarter offices in San Francisco, Brussels and
Singapore.
• It design, market and sell products including jeans, casual and dress pants, tops, shorts, skirts,
jackets, footwear, and related accessories for men, women and children around the world
under Levi's , Dockers, Signature by Levi Strauss & Co.TM and Denizen brands.
• Its merchandising and marketing reflect the brand's core attributes: authentic, courageous,
confident, effortless, connected and purposeful.
• Its Dockers brand offers an alternative to suit dressing in the form of the American staple –
the khaki pant. The Dockers brand has evolved around the world as a market leader in the
casual pant category, while also providing tops and accessories to complete a head-to-toe
offering.
• The company’s products are sold in more than 110 countries, grouped into three geographic
regions: Americas, Europe and Asia, supporting its brands throughout these regions through a
global infrastructure, developing, sourcing and marketing its products around the world.
• Company’s products are sold in approximately 50,000 retail locations worldwide, including
approximately 2,900 retail stores, both franchised and company- operated, and shop-in-shops
dedicated to its brands.
• It distribute our Levi's and Dockers products primarily through chain retailers and department
stores in the United States and primarily through department stores, specialty retailers,
franchised or other brand-dedicated stores and shop-in-shops outside of the United States.
• Levi's and Dockers products are also sold through its brand-dedicated company-operated
retail stores and through the ecommerce sites operated by the company and also through
certain key wholesale customers and other third parties.
• It distribute Signature by Levi Strauss & Co.TM and Denizen brand products primarily through
mass channel retailers in the Americas.
• The company’s common stock is primarily owned by descendants of the family of Levi Strauss
and their relatives.
- Gross margins: 51.2 percent on a reported basis, up from 50.5 percent last year.
- Net income: Growth of approximately 40 percent over the prior year, to $291 million from
$209 million, primarily reflecting the higher gross margins, lower restructuring and related
charges and debt reduction.
- EBIT: Adjustment of $480 million on a reported basis, growth of about 2 percent versus prior
year on a constant-currency basis.
- Net debt: Declined to $670 million from $834 million last year.
- Free cash flow: About $161 million, nearly double the $81 million reported last year,
reflecting lower restructuring and related payments, lower cash interest and taxes.
- • Shareholder dividend: About $70 million, a $10 million increase over last year, will be paid
in two $35 million installments in 2017.
The Levi’s® brand epitomizes classic American style and effortless cool. Since the invention and
patent of riveted clothing by Jacob Davis and company founder Levi Strauss in 1873, Levi’s®
jeans have become the most recognizable and imitated clothing in the world — capturing the
imagination and loyalty of people for generations. And while the patent has long since expired,
the Levi’s® brand portfolio continues to evolve through a relentless pioneering and innovative
spirit that is unparalleled in the apparel industry.
The Dockers® Brand has defined authentic khaki for 25 years. Since its introduction in 1986, the
Dockers® brand has been perfecting khakis — and the essential goods to go with them — for
men and women all over the world. No compromises in quality. Just versatile, essential style.
We have taken an enduring, admired brand and made it stronger. More styles. New fits. Bold
colors. We have taken the category we owned and reinvented it for today.
In 2003, they launched the Signature by Levi Strauss & Co. ™ brand, giving the value-conscious
consumer access to high-quality, affordable and fashionable jeans and casual wear from a
trusted company and name. The collection includes a variety of products for men, women and
children, designed with the high quality construction and craftsmanship that makes Levi Strauss
& Co. famous. Each pair of jeans is carefully detailed with vintage-inspired finishes and
reinforced with triangle stitching and metal rivets for long-lasting style.
Since 1873, Levi Strauss & Co. has been outfitting the world in denim. In the summer of 2011,
the Denizen® brand launched in the United States, providing great-fitting, great-looking, well-
made jeans exclusively to Target® shoppers in stores and on Target.com. With premium fabrics
and finishes and a variety of fits for the entire family, the Denizen® brand offers the quality
craftsmanship and authentic style that has made Levi Strauss & Co. world-famous for
generations. Denizen® jeans are the perfect fit for today’s active families, offering the perfect
balance of style and value.
Garment Industry Worldwide Analysis
The global apparel market is valued at 3 trillion dollars, 3,000 billion, and accounts for 2 percent
of the world's Gross Domestic Product (GDP). The fashion industry includes many sub
industries, such as menswear, womenswear and sportswear.
India’s textiles sector is one of the oldest industries in Indian economy dating back several
centuries. Even today, textiles sector is one of the largest contributors to India’s exports with
approximately 15 per cent of total exports. The textile industry is also labor intensive and is one
of the largest employers. The textile industry has two broad segments. First, the unorganized
sector consists of handloom, handicrafts and sericulture, which are operated on a small scale
and through traditional tools and methods. The second is the organized sector consisting of
spinning, apparel and garments segment which apply modern machinery and techniques such
as economies of scale.
The textile industry employs about 51 million people directly and 68 million people indirectly.
India's overall textile exports during FY 2015-16 stood at US$ 40 billion.
Distribution in the key growth markets of China, India and Russia; these markets collectively
grew 4 percent in 2016.
The increase in net revenues was primarily due to the expansion of our company-operated
retail network as well as increased promotional activity across channels, primarily in China and
India.
Banks
Wells Fargo Bank
JPMorgan Chase Bank
Corporate Office
Levis Strauss India Pvt. Ltd. Head Office - Signature Tower, Sector 30, South City 1 Sector 41, Gurgaon –
122002
Levi Strauss & Co. -1155 Battery Street San Francisco, CA 94111 U.S.A.
Tel: (415) 501-6000
Fax: (415) 501-7112
List of Directors
Name Position
Stephen C. Neal Chairman of the Board of Directors
Charles V. Bergh Director, President and Chief Executive Officer
Troy Alstead Director
Jill Beraud Director
Robert A. Eckert Director
Spencer C. Fleischer Director
Mimi L. Haas Director
Peter E. Haas Jr. Director
Christopher J. McCormick Director
Jenny Ming Director
Patricia Salas Pineda Director
Auditors Committee
Members: Mr. Alstead (Chair), Ms. Beraud, Mr. Fleischer, Mr. McCormick and Ms. Ming.
a) ROI Ratios:
b) Solvency
Ratios:
NAV Equity Shareholders’ (509.955/37,460 13.61 (328.197/37,460 8.76
Funds/No. of Equity ,145)*10,00,000 ,145)*10,00,000
shares O/S
Debt Equity Long Term Debt/ Total (1006.256/509.9 1.97322 (1004.938/328.1 3.06199
Net worth 55) 97)
c) Liquidity
Ratios:
Du Point
Analysis:
The terms of the indentures relating to the Company's unsecured notes and its amended and
restated senior secured revolving credit facility agreement contain covenants that restrict the
Company's ability to pay dividends to its stockholders. At the time the dividends were paid, the
Company met the requirements of its debt instruments.
Audit
Our Audit Committee provides assistance to the board in the board's oversight of the integrity
of our financial statements, financial reporting processes, internal controls systems and
compliance with legal requirements. The committee meets with our management regularly to
discuss our critical accounting policies, internal controls and financial reporting process and our
financial reports to the public. The committee also meets with our independent registered
public accounting firm and with our financial personnel and internal auditors regarding these
matters. The committee also examines the independence and performance of our internal
auditors and our independent registered public accounting firm. The committee has sole and
direct authority to engage, appoint, evaluate and replace our independent auditor. Both our
independent registered public accounting firm and our internal auditors regularly meet
privately with this committee and have unrestricted access to the committee. The Audit
Committee held eight meetings during 2016.
Quality of Earning
Levi Strauss & Co. profit jumped 71% in its latest quarter as foreign-exchange headwinds
subsided somewhat, but the jeans maker warned that the coming year would be challenging.
Overall, the privately held company reported a profit of $65.8 million for the quarter ended
Feb. 28, up from earnings of $38.4 million a year earlier.
Revenue edged down 0.2% to $1.06 billion. Currency fluctuations dragged on the top line by
$46 million. Revenue in its Americas division, where most of its sales are generated, fell 1% to
$571 million, though direct-to-consumer and wholesale revenues grew for the region, primarily
because of higher sales in Mexico.
Europe sales were just about flat at $276 million, and Asia had sales climb $209 million, the
jeans maker said.
Net revenues at Levi Strauss & Co. is as per GAAP measure defined as gross product sales minus
returns, discounts and allowances, plus licensing revenue.
Cash Flow
2016 as compared to 2015
The increased market price is colluding with the increasing stock price of Levi Strauss &
Company. The company’s performance has been really good in such a competitive market.
Yes, as an investor I would like to invest in shares of Levis Strauss & Co. because of its ability to
pay to its investors have substantially increased which shows that the financial performance of
the company has improved.
Analysis
Table: Key Performance Indicators
Current ratio 1.90 2.21 1.80
Quick ratio 0.14 1.27 1.08
Debt to equity 0.91 1.97 3.06
Sales to inventory 2.96 6.35 7.40
Profit margin (%) 1.35 6.39 4.65
(Source: http://www.creditguru.com/index.php/financial-analysis/financial-statement-
ratio-analysis/107-industry-norms-and-key-business-ratios )
Here, as you can see current ratio lies around the same number as the industry
benchmark for both the years so there is no cause of concern
Quick ratio of the Levi Strauss is too high when compared with the industry which
means that too much of the long term liabilities have been used to fund the quick
assets
Debt to equity ratio is much higher than what is set as the benchmark of the
industry which means that there is too much debt in the system which might
hamper the company’s ability to raise cheaper funds
Sales to inventory ratio is too high when compared with industry benchmark
which simply means that Levi Strauss is running the additional risk of running out
of stock during high sales period
Profit margin of the company is higher than industry average which is a good
indicator
Problems
No specified information provided in accordance to the line item “Other
Expenses”
No mention of the name of auditor in the annual report
Auditors’ committee criteria for choosing the auditor has been given on the
website of the company but is not disclosed in the annual report
Policy of restricted cash has been used to understate the cash profits, also there
is no specifications provided for the fact that what it is that might be considered
right amount to carry out the said operations
Strategic advice
Our first advice to the company would be cut down on the excess debt
We would also advice the company to give full disclosure regarding various
important information like auditors, other expense amount in the balance sheet
Next we would advise Levi Strauss to increase its production to reduce the sales
to inventory ratio to acceptable terms
The company could also disinvest in short term assets to go for long term
investments
SWOT Analysis
References
http://quotes.wsj.com/JP/9836
http://quotes.wsj.com/LVISF
http://levistrauss.com/wp-content/uploads/2014/01/Levi-Strauss-Annual-Report-2016-
1.pdf