Levis

  • Denim   jeans maker, Levi Strauss & Co. reported third quarter results which beat   forecasts on the top and bottom lines. Work-from-homers have opted for   comfort and a casualization of attire. This trend, which was also seen in   Nike’s most recent results, has benefitted denim due to business-wear not   being required when working remotely over Zoom.

  • Levis   saw revenue fall 27% to $1.06 billion from a year earlier. This was mainly   due to impacts from the Covid-19 pandemic, including reduced foot traffic and   ongoing closures of company-operated and third-party retail operators.

  • Wholesale   revenues fell more than direct-to-consumer channels due to e-Commerce which   grew revenue 52% to partially offset the declines. Total Digital sales   (including wholesale and partner websites like Amazon) comprised 24% of   Levi’s total sales for the quarter, double what it was a year ago. It says   online demand has remained strong even though physical stores have reopened.

  • Levis   gained market share in the Women’s apparel category by selling more items   like crop tops and tattered denim shorts in the quarter. Women’s apparel   makes up 37% of total sales.

  • Geographically   net sales fell across the board, with the Americas down 29%, Europe 16%, and   Asia 42%. The fall in Asia was due to a significant impact from India where   several states remained in government mandated lockdown throughout the third   quarter. Excluding India, sales in Asia declined by only 24%.

  • Gross   profits fell 24.7% to $577 million. Gross margins improved by 130 basis   points to 54.3% due to price increases, a higher proportion of sales in the   higher-margin direct-to-consumer channel, and a reduction in estimated   Covid-19 related inventory charges for adverse fabric purchase commitments.   The adjusted gross margin excluding the Covid-19 related charges was 53.6%.

  • Selling,   general and administrative (SG&A) expenses declined 19% to $484 million   due to cost savings. In July, the company announced it was slashing about 15%   of its global corporate workforce, affecting about 700 jobs.

  • Adjusted   EBIT was $84 million with the margin at 8%. Adjusted net income fell 78% to   $31 million, or 8 cents per share. Analysts were expecting a loss of 22 cents.

  • The   company returned to positive adjusted free cash flow generation in the third   quarter of $183 million whilst inventories rose by 1%, with the company   calling it a healthy position ahead of the holiday period. Cash totaled $1.4   billion at the end of the quarter.

  • Net   Debt at the end of the period totaled $142 million. However the leverage   ratio worsened to 4.5x from 1.5x due to the impact on adjusted EBIT. The   company will not pay dividends for Q3 and Q4 but will reassess as operating   conditions evolve.

  • Levis   expects sales to be down 14% to 15% year-on-year during this holiday quarter,   with profitability being flat, to slightly up, compared to the prior year.   The company has a market cap of $6.2 billion and shares are down 23% this   year.

Levis