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Levi Strauss posts sales and profit growth

By Prachi Singh

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Business

Levi Strauss & Co., for its first quarter ended February 23, 2020 reported net revenue growth of 5 percent on a reported basis, and 6 percent on a constant-currency basis excluding 11 million in unfavourable currency effects to 1,506 million dollars. The company said in a statement that net revenues growth was partially offset by an estimated 20 million dollars adverse impact of store closures and reduced traffic during the last six weeks of the first quarter resulting from the outbreak of Covid-19 in China. Adjusted diluted EPS rose 2 cents to 40 cents.

“Our first quarter results underscore the strength of the Levi’s brand and the efficacy of our strategies to diversify our business, both of which will be crucial to coming out of the current crisis stronger than ever,” said Chip Bergh, President and CEO of Levi Strauss & Co., adding, “As this human and economic tragedy unfolds globally over the coming months, we are taking swift and decisive action that will ensure we remain a winner in our industry.

Review of Levi Strauss’ Q1 results

The company’s direct-to-consumer net revenues grew by 13 percent on a constant-currency basis, while net revenues from the company’s wholesale business grew 1 percent on a constant-currency basis, reflecting growth in Europe and Asia partially offset by a decline in the Americas. Net revenues from tops grew 5 percent, bottoms 4 percent, women’s grew 12 percent and men’s 2 percent.

Gross margin for the quarter increased 110 basis points on a reported basis to 55.7 percent, while net income was up 4 percent, and adjusted net income up 8 percent. The company added that adjusted EBIT decreased 8 percent on a reported basis and 7 percent in constant-currency; with adverse impact of Covid-19 of approximately 10 million dollars. Adjusted EBIT margin of approximately 13 percent declined compared to the first quarter of 2019 on both reported and constant-currency basis.

In the Americas, net revenues grew 4 percent on both a reported and on a constant-currency basis, as strong direct-to-consumer growth was partially offset by an anticipated decline in wholesale. The region’s direct-to-consumer net revenues grew 22 percent on a reported basis, while wholesale net revenues declined 5 percent on a reported basis; U.S. wholesale net revenues declined 6 percent. Operating income for the region was flat on both a reported and constant-currency basis, as the higher net revenues were offset primarily by the earlier timing of advertising spend.

In Europe, net revenues grew 10 percent on a reported basis and 13 percent on a constant-currency basis, reflecting continued broad-based growth in both direct-to-consumer and wholesale channels across the region. The region’s operating income grew nine percent on a reported basis and 12 percent on a constant-currency basis, in line with revenue growth.

In Asia, net revenues decreased 2 percent on a reported basis and 1 percent on a constant-currency basis, as net revenues growth across most of the region’s markets was offset by an estimated 20 million dollars adverse impact of store closures and reduced traffic during the last six weeks of the first quarter, which was primarily concentrated in mainland China but also impacted Hong Kong and north Asia. The Covid-19 impact in combination with the political unrest in Hong Kong prior to the outbreak collectively adversely impacted the total region’s year-over-year net revenues growth comparison by an estimated 10 percentage points. Asia’s operating income declined 24 percent on both a reported and constant-currency basis.

Picture:Facebook/Levi's

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Levi Strauss