Fitch downgrades Levi Strauss

Fitch Ratings has affirmed its Issuer Default Rating (IDR) on Levi Strauss &  Co. (Levi's) at

 'B+' and revised the company's Rating Outlook to Negative from Stable, as reported by Reuters Wednesday.
 
In addition, Fitch affirmed Levi's credit facility and downgraded the company's unsecured term loan and notes, as the denim company had $2 billion of debt outstanding at fiscal year-end Nov. 27, 2011.     
               
The Negative Outlook reflects the difficulty in reversing the long-term decline in Levi's operating margins and Fitch's expectation for only gradual operating improvement beginning in the second half of 2012 (2H'12), gathered Reuters from the rating firm.                
               
Levi's EBIT margins have been in decline for the past five years, narrowing from 14.3% in 2006 to 7.2% in 2011 due to the global recession together with Levi's investments in its products, advertising, and retail stores. The surge in cotton costs also affected margins in 2011, as price increases were not sufficient to offset these higher costs.         
 
“Levi's has adequate liquidity, with $495 million in availability under its revolver that expires in 2016, and $204 million in cash on hand as of fiscal year-end. The maturity schedule is manageable, with the nearest debt maturity (excluding bank borrowings) being the $324 million term loan due 2014,” summarized Fitch in a note.