Levi Strauss swings to profit in Q1, revenues up 7 percent

Levi Strauss & Co. in its statement for the first quarter ended February 24, 2019 said net revenues grew 7 percent on a reported basis and 11 percent on a constant-currency basis, excluding 48 million dollars in unfavourable currency translation effects. The company added that diluted earnings per common share were 37 cents compared with a 5 cent loss per common share for the same quarter of fiscal 2018.

"We delivered our sixth consecutive quarter of double-digit constant-currency revenue growth," said Chip Bergh, President and CEO of Levi Strauss & Co., adding, "Growth was broad-based across all three regions and all channels, demonstrating that our strategies are working and our investments are paying off."

Highlights of Q1 results at Levi Strauss

Reported net revenues related to the company's direct-toconsumer business grew 10 percent, primarily due to performance and expansion of the retail network as well as e-commerce growth. The company had 70 more company-operated stores at the end of the first quarter of 2019 than it did a year prior. Reported net revenues related to the company's wholesale business grew 5 percent, reflecting growth in all regions.

First quarter net income attributable to Levi Strauss & Co. increased 166 million dollars, primarily due to charges in the prior year from the transitional impact of the 2017 Tax Cuts and Jobs Act of 99 million dollars for the re-measurement of deferred tax assets and liabilities and 37 million dollars on undistributed foreign earnings.

First quarter adjusted net income grew 81 percent, which the company said was primarily due to a 37 million dollars transition charge in the prior year on undistributed foreign earnings, as well as 26 million dollars higher adjusted EBIT in the current year. First quarter Adjusted EBIT grew 14 percent inclusive of unfavourable currency translation effects and 21 percent on a constant currency basis.

The company added that on a reported basis, gross margin for the first quarter was 54.6 percent of net revenues compared with 54.9 percent in the same quarter of fiscal 2018, primarily due to 90 basis-points of unfavourable transactional currency impact, which was partially offset by the margin benefit from growth in the company's global direct-to-consumer channel. Operating income for the first quarter of 201 million dollars was up 15 percent reflecting higher revenues and a 100 basis-point increase in operating margin.

Levi Strauss performance across core geographies

In the Americas, the company’s net revenues grew 9 percent on a reported basis and 10 percent on a constant-currency basis, reflecting higher revenues across both wholesale and direct-to-consumer channels across the region. Operating income for the region grew 11 percent on a reported basis and 12 percent on a constant-currency basis.

In Europe, net revenues grew 3 percent on a reported basis and 10 percent on a constant-currency basis, reflecting continued broad-based growth across direct-to-consumer and wholesale channels. The region's operating income grew 6 percent on a reported basis and 13 percent on a constant-currency basis.

In Asia, net revenues grew 8 percent on a reported basis and 14 percent on a constant-currency basis, reflecting strong performance across traditional wholesale, franchisee and direct-to-consumer channels. Revenue growth was broad-based across the region's markets, including China. The region's operating income grew 6 percent on a reported basis and 13 percent on a constant-currency basis.

Reaffirming its outlook for fiscal 2019, the company said, it expects constant-currency net revenues growth of mid-single digits; and constant-currency adjusted EBIT margin flat-to-slightly up.

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