Levi Strauss & Co.

  • The denim jeans   maker Levi Strauss & Co. reported a first quarter double-digit decline in   sales as ongoing store closures and a lack of foot traffic impacted results.   However, higher gross margins and cost-saving initiatives helped offset the   declines.

  • Revenue declined 13% on a reported basis (and 16% in   constant-currency) to $1.3 billion compared to the same period in the prior   year.

  • The decrease was primarily due to   reduced traffic in the US and ongoing closures of company-operated and 3rd   party retail locations, particularly in Europe. The first quarter of fiscal   2021 did not include the benefit of a Black   Friday, like the first quarter of fiscal 2020 did, which impacted revenue by   around three percentage points.

  • Global digital net revenue grew 41% compared to the same period a   year-ago, and comprised approximately 26% of total first-quarter 2021 net   revenues - which is up from 16% in the first quarter of the prior year.

  • Gross profit fell 9.4% to $760 million. Gross margins increased 250   basis points to 58.2%, a record high for the company. Adjusted EBIT was $174   million, and the Adjusted EBIT margin was 13%, a 70 basis points increase   from the first quarter of 2020. Costs were well   contained, declining 12% from Q1 2020.

  • Net income declined 6.67% to $142.5 million, or 35 cents per share.   The decline in profits is primarily attributable to the adverse revenue   impact of Covid-19, as well as higher interest expense, reflecting the   company’s additional borrowing in the prior year to enhance its liquidity   position. The interest expense will decline in future quarters as the company   issued US Dollar bonds of $500 million at a 3.5% coupon and used the proceeds   and cash on hand to repay its $800 million 5% coupon bonds in March 2021. The   company had total available liquidity of $2.8 billion; and cash and cash   equivalents at quarter end were $2 billion.

  • Levis boosted its sales   and profit outlook for the first half of the year, and is anticipating sales   will return to pre-pandemic levels by the fourth quarter.

  • Sales are expected to   grow 24% to 25%, and adjusted earnings are forecast to be in a range of 41   cents to 42 cents, which implies earnings of 7 cents to 8 cents during the   fiscal second quarter – better than analysts had expected.

  • The San Francisco-based company, which listed in March 2019, is planning on adding 40 self-branded stores and 200 outlet locations in the US to improve direct-to-consumer sales. These new generation stores will be designed to be smaller and equipped with AI machine learning to help with stock levels. Levis has been battered by quarantine restrictions and the use of comfier bottoms in Zoom meetings. Despite that, the share is up 30% year-to-date on reopening optimism.

Levi Strauss & Co.