An employee holds a shopping bag while calling a customer at the Levi Strauss & Co. flagship store in San Francisco, March 18, 2019.
David Paul Morris | Bloomberg | Getty Images
Denim retailer Levi Strauss & Co. on Tuesday reported earnings and sales for the fiscal first quarter that beat analysts’ estimates as it sold more jeans and T-shirts at higher prices, often directly to customers.
Levi also reiterated its guidance for fiscal 2022, assuming inflationary pressures do not deteriorate significantly or the global economy shuts down. It considered all the implications of its recent decision to temporarily halt operations in Russia, which accounts for about 2% of its total sales.
The retailer has yet to see consumers trade in for cheaper clothes even as everything from gas prices to grocery bills are skyrocketing, Levi CEO Chip Bergh said in a phone interview with CNBC. However, as the company has increased prices on some items to offset other expenses within the company, consumer demand has remained strong, he added.
Certainly, Bergh said, Levi is keeping a close eye on consumer demand, knowing forecasts of a looming recession are growing among economists. “We don’t stick our heads in the sand,” said the CEO. “When we see [demand] begin to get shaky, we will take appropriate action.”
Levi shares rose about 1.5% in extended trading after ending the day down 1.5%.
Here’s how Levi fared against Wall Street expectations for the three months ended Feb. 27, based on a Refinitiv poll of analysts:
- Earnings per share: 46 cents adjusted versus 42 cents expected
- Revenue: $1.59 billion versus $1.55 billion expected
Levi reported net income of $196 million, or 48 cents a share, compared to net income of $143 million, or 35 cents a share, a year ago. Excluding one-time items, it earned 46 cents a share, better than the 42 cents analysts were expecting.
Revenue rose 22% to $1.59 billion from $1.31 billion a year earlier. That beat expectations for $1.55 billion.
Levi said sales have fallen about $60 million recently due to supply chain constraints. Global direct-to-consumer sales were up 35% from the year-ago period, and wholesale sales were up 15%.
While Levi still partners with big retailers like Target and department stores like Macy’s to sell its jeans, the company has increasingly pushed shoppers toward its own brick-and-mortar stores and websites. Not only can these transactions be more profitable, but they also allow Levi to build closer relationships with buyers and gain more insight into their browsing habits. Direct-to-consumer accounted for 39% of total revenue for the quarter, up from 38% in the prior period and 36% a year ago, the company said.
At a regional level, revenue grew 26% in the Americas, 13% in Europe and 11% in Asia year over year.
Levi reiterated its guidance for fiscal 2022, which calls for revenue growth of 11% to 13% year over year. Analysts had forecast an 11.8% rise.
The retailer still sees its annual earnings per share between $1.50 and $1.56, compared to analysts’ forecast of $1.54.
“The denim category is growing in the low double digits [rate] relative to where it was before the pandemic,” Chief Financial Officer Harmit Singh told CNBC, saying, “The world continues to get a lot looser.”
Singh added: “We have seen that demand has maintained momentum in March and that gives us confidence for the remainder of the year.”
The full press release on Levi’s earnings can be found here.