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
Levi Strauss & Co. on Thursday announced double-digit sales decline for its fiscal first quarter, ongoing store closures in Europe and reduced foot traffic in the United States due to the Covid pandemic weighing on results.
But the denim maker has improved its sales and profit outlook for the first half of the year, assuming the global health crisis doesn’t worsen from here. CFO Harmit Singh said in an interview with CNBC that the company expects sales to return to 2019, pre-pandemic levels by the fourth quarter.
Its shares jumped more than 6% in after-hours trading.
“These results indicate very good evidence that we will emerge from the pandemic as a stronger company,” CEO Chip Bergh told CNBC. “We exceeded our own expectations internally [and] exceeded external expectations, despite closing a third of our stores in Europe for the entire quarter. “
Here’s how the company fared for its quarter ended Feb. 28, compared to what analysts expected, based on a Refinitiv survey:
- Earnings per share: 34 cents adjusted vs. 25 cents expected
- Turnover: $ 1.31 billion against $ 1.25 billion expected
Levi’s net income edged down to $ 142.5 million, or 35 cents per share, from $ 152.7 million, or 37 cents per share, a year earlier. Excluding one-time fees, the company earned 34 cents per share, better than the 25 cents expected by analysts, according to Refinitiv.
Total revenue fell about 13% to $ 1.31 billion from $ 1.51 billion a year earlier. That’s better than the $ 1.25 billion forecast by analysts.
The retailer said the double-digit drop in year-over-year sales was mainly due to reduced foot traffic to its stores during the pandemic, as well as ongoing store closings in some markets where Covid restrictions remained in place. In Europe, for example, more than 40% of Levi’s stores are currently closed, with others operating at reduced hours, the company said.
Levi’s wholesale revenues fell 4% in the last quarter, marking an improvement over the prior period.
Direct-to-consumer sales declined by 26%, due to a decrease in the number of customers visiting Levi’s stores and in particular in markets that depend on tourism. The decline was partially offset by a 25% increase in e-commerce sales held by the company in the quarter, Levi’s said. Total online revenue, which includes digital sales from wholesale partners, increased 41%.
Although business trends are improving, earnings and sales are expected to continue to be “significantly affected” at least until the second quarter of 2021, Levi’s said.
The company has raised its outlook for revenue and profits in the first half of the year, assuming the pandemic does not worsen.
Sales are now expected to increase 24% to 25%, and adjusted profit is expected to be in a 41-cent to 42-cent range, implying a 7-cent to 8-cent profit in the second fiscal quarter. Analysts were asking for a profit of 5 cents per share in the second quarter.
Levi’s shares are up nearly 25% year-to-date. The company has a market capitalization of $ 10 billion.