Levi Strauss & Co. (LEVI) stories successful in earnings within the second quarter of 2021
Levi Strauss & Co. said Thursday that shoppers in the US and China are stocking up on jeans in new sizes and styles as they emerge from their homes during the pandemic.
Momentum in both stores and online boosted second quarter results and revenue above analysts’ expectations. Although sales were still 3% down from 2019, the retailer expects sales in the third quarter of the fiscal year to be at their pre-pandemic best levels. That was something Levi hadn’t previously expected until the fourth quarter.
Levi’s stock rose roughly 3% on the news in expanded trading.
As Levi raised its sales and earnings outlook for the remainder of the year, the company cautioned against assuming the Covid pandemic does not worsen globally.
“There are many things that are beyond our control like the pandemic … and the Delta variant and what will happen next,” Chief Executive Chip Bergh said in a telephone interview. “But the team has shown a lot of agility and responsiveness.”
Here’s what the company reported for the quarter ended May 30, versus Wall Street expectations, based on an analyst survey conducted by Refinitiv:
- Earnings per share: 23 cents adjusted vs. 9 cents expected
- Revenue: $ 1.28 billion versus an expected $ 1.21 billion
Levi said it had risen to earnings of $ 65 million, or 16 cents per share, after a net loss of $ 364 million, or 91 cents per share, the previous year. Without one-off adjustments, Levi earned 23 cents per share, beating analyst estimates of 9 cents.
Levi’s sales rose 156% to $ 1.28 billion from $ 498 million a year ago. That exceeded expectations of $ 1.21 billion.
Sales in the US and China exceeded 2019 levels but still declined in Europe on a biennial basis due to ongoing store closures related to the health crisis. Approximately a third of Levi’s European stores and 17% of global locations closed during the reporting period.
According to the company, 92% of stores are currently reopened.
Price increases, savings in the procurement of materials and reduced advertising activities all contributed to the increase in profits. It posted record profit margins. Levi said it had already adjusted most of its product costs by the first half of 2022 to reflect very low single-digit inflation.
A new denim cycle adds to the sales momentum. In the past few months, tight-fitting trousers have gone out of fashion, with buyers flocking to looser, loose-fitting, flared jeans instead. Many consumers feel the need to completely refresh their wardrobes. Levi also sees growth in his tops business.
“We’re seeing good evidence of the new denim cycle being driven by the looser and wide fits we’ve cited and that makes us very optimistic for the second half of this year,” Bergh told CNBC.
Bagger fits of jeans accounted for about 50% of Levi’s sales for women and men last quarter. About 35% of US consumers changed their waist sizes up and down during the pandemic, Bergh said.
Levi also said it has worked to strengthen its wholesale operations by investing in relationships with key partners like Nordstrom and leaving stores that translate into discounts. Wholesale sales rose 167% over the previous year in the last period.
And the company continues to grow its digital business, with global e-commerce sales up 75% year-over-year, which is roughly 23% of total sales.
For fiscal 2021, after adjustments, Levi expects earnings between $ 1.29 and $ 1.33 per share. Analysts were looking for earnings of $ 1.15 per share.
For the second half of the year, Levi expects sales to grow 28 to 29% year over year and an increase of 4 to 5% compared to 2019. The company has not provided specific estimates for the full year, but said sales are close to level from 2019 should be. Analysts expect sales growth of 24.6% for the full year from 2020.
“Sales in most markets are recovering faster than expected and we are coming out of the pandemic with a sustainable and improved structural economy,” said CFO Harmit Singh in a press release.
Levi increased its dividend for the third quarter by 2 cents per share to 8 cents.
Levi’s stock has rebounded nearly 40% since the start of the year. The company’s market capitalization is around $ 11.2 billion.
The full Levi’s press release can be found here.