UPDATE 2-Levi Strauss sales up but debt refinancing hurts

* Q2 loss $14.4 mln compared with year-ago loss $4.1 mln

* Operating income up 23.4 pct to $69.2 mln

* Net revenue up 8 pct to $976.5 mln

* Gross margins rise to 51 pct of revenue from 46 pct (Adds details from conference call, executives' comments)

By Phil Wahba

NEW YORK, July 13 (Reuters) - Levi Strauss & Co reported an increase in sales as its namesake brand won back shoppers looking for more affordable jeans, but results were dampened by the costs of refinancing debt.

Levi Strauss said it was helped by more full-price selling and the higher gross margins that followed an increase in its number of outlet stores.

Last year, the company Levi Strauss bought 73 Levi's and Docker's outlet stores from a former licensee and it has been adding to its fleet of full-price Levi's brand stores.

The company operates 453 stores in 26 countries. Those stores made up 16 percent of net revenue in the first half of the year, compared with 11 percent last year.

That retail expansion has helped mitigate tepid sales in some mature markets such as the United States, Europe and Japan, where consumers have pared back purchases.

On a call with analysts, Chief Executive John Anderson warned that consumers were under pressure in those markets and would likely remain so through the end of the year.

But the company said it has benefited from a switch by some consumers back to more affordable jeans from premium brands.

"Pre-recession, they didn't think twice about spending $400-$500 for a pair of jeans -- they realized they were getting ripped off," Chief Financial Officer Blake Jorgensen told Reuters.

Revenue was up 8 percent in the Americas region, which includes in the United States, also up 8 percent in Asia, and was up 9 percent in Europe.

In the Americas, which accounts for nearly 60 percent of all sales, net revenue benefited from a strong performance by Levi's jeans that helped make up for weaker Signature and U.S. Dockers sales.

Excluding the effects of currency, revenue was down 2 percent in Asia as the Japanese market weighed on sales even as they rose more than 20 percent in markets such as China.

RESTRUCTURING HIT

Levi Strauss, based in San Francisco, reported a net loss of $14.4 million, compared with a loss of $4.1 million a year earlier, with much of this year's loss coming from the refinancing of about $900 million in high-yield debt during the quarter, Jorgensen said.

Excluding those and other one-time charges, Levi Strauss' operating income rose 23.4 percent to $69.2 million.

Gross margins rose 5 percentage points to 51 percent compared with 46 percent for the same quarter a year earlier.

Overall net revenue in the second quarter, which ended May 30, rose 8 percent to $976.5 million, aided in part by favorable currency fluctuations, the company said. Excluding the effect of currency, revenue was up 5 percent.

Levi Strauss, which is privately held, reports quarterly results because its debt is publicly held.

The company competes with a number of denim brands, including Guess Inc (GES.N) and True Religion (TRLG.O), whose shares rose 3.1 percent and 2.3 percent, respectively, on Tuesday. (Reporting by Phil Wahba, Editing by Leslie Gevirtz and Matthew Lewis)