Jeans will be on display in a Levi Strauss store in New York on March 19, 2019.
Shannon Stapleton | Reuters
Levi Strauss & Co. reported third quarter results and sales on Wednesday that exceeded analysts’ expectations as consumer demand picked up during the back-to-school season and shoppers sought to stock up on the latest denim trends.
The stock rose more than 2% in extended trading on the news after losing more than 5% the day.
Although many apparel companies have been hit by global supply chain bottlenecks, Levi has done relatively well because of its diversified manufacturing. Less than 4% of its global volume comes from Vietnam, the company said. The production facilities there were hit hard by regular shutdowns during the pandemic.
“Our supply chain is truly a source of competitive advantage,” Chief Executive Chip Bergh told CNBC. “We can move products with great agility. … We have run the business in different scenarios over the past 18 months.”
Here’s how the company has outperformed Wall Street’s expectations in the three-month period ended August 29, based on an analyst survey by Refinitiv:
- Earnings per share: 48 cents adjusted vs. 37 cents expected
- Revenue: $ 1.5 billion versus an expected $ 1.48 billion
Net income rose to $ 193 million, or 47 cents per share, from $ 27 million, or 7 cents per share, a year ago. Without one-off effects, the company earned 48 cents per share. Analysts had expected profits of 37 cents per share.
Revenue grew 41% to $ 1.5 billion from $ 1.06 billion a year ago. That slightly exceeded the estimate of $ 1.48 billion.
Bergh said Levi cut its sales by about $ 10 million due to supply chain issues.
Wholesale sales rose 45% year over year, driven by strong demand in the US and Europe, the company said. Direct sales to consumers increased 34% from 2020 and 3% on a two-year basis as more shoppers visited Levi’s own brick and mortar denim and loungewear stores.
Digital transactions grew 10% year-over-year and 76% year-over-year. They accounted for about 20% of Levi’s total sales.
The company found that its revenues benefited from Levi selling more items directly to consumers at higher prices rather than taking advantage of promotions.
The ongoing health crisis is still closing stores around the world. Levi said about 10% of its company-owned stores closed in the last quarter, mostly in Asia. Around 4% remain closed, it said.
For the fourth quarter, Levi expects sales to grow by 20 to 21% year-over-year, while analysts had called for an increase of 22%. The company warned its outlook assumes the health crisis will not worsen dramatically.
The fourth quarter result will be between 38 cents and 40 cents per share on an adjusted basis. Analysts were looking for adjusted earnings per share of 40 cents.
For the full year, Levi sees adjusted earnings in the range of $ 1.43 to $ 1.45 per share, ahead of Wall Street’s consensus estimate of $ 1.33 per share. This implies sales growth of more than 27% for the full year, which would bring sales close to 2019 levels.
“Our expectation is that the holiday will be pretty good,” said Bergh. “From a supply chain perspective, we’re chasing demand to make sure everyone can put Levi under their Christmas tree.”
The company also announced on Wednesday that its board of directors approved a new $ 200 million share buyback program last quarter.
Levi stock is up about 21% year-to-date, equating to a market value of $ 9.76 billion.
The full results report can be found here.