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Levi Strauss earnings beat as new denim styles drive sales growth, retailer raises outlook

Denims are displayed at a Levi Strauss retailer in New York, March 19, 2019.

Shannon Stapleton | Reuters

Levi Strauss & Co. on Wednesday reported fiscal third-quarter earnings and gross sales that topped analysts’ expectations, as client demand picked up in the course of the back-to-school season and shoppers looked to stock up on the latest denim trends.

Its inventory rose greater than 2% in prolonged buying and selling on the information, having closed the day down greater than 5%.

Though many attire firms have been hit by international provide chain bottlenecks, Levi has fared effectively comparatively resulting from its diversified manufacturing. Lower than 4% of its international quantity comes from Vietnam, the corporate stated. Production facilities there have been hard hit by periodic shutdowns in the course of the pandemic.

“Our provide chain actually is a supply of aggressive benefit,” Chief Govt Chip Bergh informed CNBC. “We are able to transfer product round with plenty of agility. … We have been operating the enterprise towards totally different eventualities for the final 18 months.”

This is how the corporate did within the three-month interval ended Aug. 29 in contrast with what Wall Road was anticipating, primarily based on a survey of analysts by Refinitiv:

  • Earnings per share: 48 cents adjusted vs. 37 cents anticipated
  • Income: $1.5 billion vs. $1.48 billion anticipated

Internet revenue rose to $193 million, or 47 cents per share, from $27 million, or 7 cents a share, a yr earlier. Excluding one-time gadgets, the corporate earned 48 cents per share. Analysts had anticipated income of 37 cents per share.

Income rose 41% to $1.5 billion from $1.06 billion a yr earlier. That barely topped estimates of $1.48 billion.

Bergh stated Levi took a roughly $10 million hit to its income resulting from provide chain points.

Wholesale income grew 45% yr over yr, pushed by sturdy demand within the U.S. and Europe, the corporate stated. Direct-to-consumer gross sales rose 34% from 2020 ranges, and climbed 3% on a two-year foundation, as extra consumers visited Levi’s personal brick-and-mortar shops for denim and lounge put on.

Digital transactions have been up 10% yr over yr and up 76% on a two-year foundation. They accounted for about 20% of Levi’s whole gross sales.

The corporate famous that its earnings benefited from Levi promoting extra gadgets on to shoppers and at fuller value factors, fairly than utilizing promotions.

The lingering well being disaster continues to be shuttering shops world wide. Levi stated roughly 10% of its company-operated shops have been closed in the course of the newest quarter, primarily in Asia. Roughly 4% stay shut, it stated.

For its fourth quarter, Levi is anticipating year-over-year income progress of 20% to 21%, whereas analysts had been calling for a 22% enhance. The corporate cautioned its outlook assumes the well being disaster would not dramatically worsen.

It sees fourth-quarter earnings ranging between 38 cents and 40 cents per share, on an adjusted foundation. Analysts had been in search of an adjusted, per-share revenue of 40 cents.

For the total yr, Levi sees adjusted earnings within the vary of $1.43 to $1.45 per share, forward of Wall Road’s consensus estimate of $1.33 per share.

“Our expectation is that vacation goes to be fairly good,” Bergh stated. “We’re chasing demand proper now, from a provide chain standpoint, to make it possible for everyone can put Levi below their Christmas tree.”

The corporate additionally stated Wednesday that its board accredited a brand new $200 million share buyback program in the course of the newest quarter.

Levi shares are up about 21% yr to this point, placing its market worth of $9.76 billion.

Discover the total earnings report here.


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