Levi Strauss earnings beat as new denim kinds drive gross sales development, retailer raises outlook

Levi Strauss & Co. on Wednesday reported fiscal third-quarter earnings and gross sales that topped analysts’ expectations, as client demand picked up throughout 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 world provide chain bottlenecks, Levi has fared properly comparatively resulting from its diversified manufacturing. Lower than 4% of its world quantity comes from Vietnam, the corporate mentioned. Production facilities there have been hard hit by periodic shutdowns throughout the pandemic.

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

Here is how the corporate did within the three-month interval ended Aug. 29 in contrast with what Wall Road was anticipating, based mostly 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

Web earnings rose to $193 million, or 47 cents per share, from $27 million, or 7 cents a share, a yr earlier. Excluding one-time objects, the corporate earned 48 cents per share. Analysts had anticipated earnings 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 mentioned Levi took a roughly $10 million hit to its income resulting from provide chain points.

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

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

The corporate famous that its earnings benefited from Levi promoting extra objects on to shoppers and at fuller worth factors, moderately than utilizing promotions.

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

For its fourth quarter, Levi is anticipating year-over-year income development of 20% to 21%, whereas analysts had been calling for a 22% improve. The corporate cautioned its outlook assumes the well being disaster does 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 complete 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 mentioned. “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 mentioned Wednesday that its board accepted a brand new $200 million share buyback program throughout the newest quarter.

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

Discover the complete earnings report here.