Levi Strauss India reported a 27% decline in its FY17 net profit to Rs 57.83 crore owing to higher royalty paid to parent Levi Strauss and Co and an increase in expenditure, the company said in a filing with the Registrar of Companies. The company’s royalty costs soared by 15.2% compared to FY16 to Rs 72.14 crore in FY17. Expenditure in FY17 increased 16.7% to Rs 709.5 crore. The operating profit declined 8.1% compared to FY16 to Rs 132.98 crore.
Revenue of the company grew 11.9% year-on-year to Rs 842.48 crore in FY17. “The company grew revenues by 11.9%. Profit before tax, royalty and depreciation stood at 15.8% of revenues against 19.2% in FY16. The drop in the profit before tax is due to payment of allocated head office charges to the parent company and extension of the excise duty on apparels by the government,” Sanjeev Mohanty, managing director, Levi Strauss India, said in the RoC statement.
In the Union Budget for FY17, excise duty of 2% was levied on branded ready-made garments of retail sale price of Rs 1,000 or more, which impacted the company’s demand and profitability in a competitive environment. According to a Technopak report, the Indian apparel market has seen growing customer inclination towards western wear and casual wear. Going forward, the key focus of the company will be to improve consumer connect through relevant product innovation, introduction of new fit portfolios for women and ensuring a profitable store network. “Our company has strong support from its parent company, Levi Strauss and Co, considering the potential of the Indian market.