Levi Strauss Co. (LEVI, Financial) released its second-quarter earnings after the market closed on July 7. While the company posted higher than expected earnings and revenue for the quarter, it remained down on a year-over-year basis.
Performance at a glance
The San Francisco-based manufacturer of denim products posted an adjusted loss per share of 48 cents, which exceeded analysts’ expectations of a loss per share of 49 cents. Revenue of $497.5 million tumbled 62% on a year-over-year basis and fell short of estimates of $486 million.
Reflecting on the company’s performance, President and Chief Executive Officer Chip Berg said:
“We started the year with strong momentum, but the global pandemic and economic crises had a significantly negative impact on our second quarter results, as our stores and most wholesale doors were closed around the world for the majority of the quarter. I’m proud of how the team stepped up in response, accelerating our activation of key e-commerce and omni-channel capabilities, proactively cutting costs and managing cash smartly, and finding innovative ways to connect the Levi’s brand with its fans.”
E-commerce sales grew 25%in the reported quarter and accounted for 15% of company’s total quarterly revenue.
The company reported sales declines in all the regions as stores remained shut for the majority of the quarter due to the coronavirus outbreak. Sales fell 59% in the U.S., 68% in Europe and 61% in Asia. Online sales in all the segments were strong, but not enough to make up for the loss of sales due to store closures.
At the end of the quarter, the company had total liquidity of about $2 billion. In addition, the company has $448 million under its revolving credit facility.
Response to Covid-19
The jeans maker reported it would cut 700 jobs, which is equal to 15% of its global corporate workforce, in an effort to trim costs. Berg said that the move would not only result in annual savings of $100 million but also "enable us to become a leaner and more market-responsive organization, as well as give us greater confidence in our cost structure given the uncertainties around the impact of the virus."
Despite the staff cuts, the company reports that nearly 90% of the stores are back open worldwide, with approximately 40% of them reporting sales growth on a year-over-year basis. Additionally, the company stated it is witnessing sequential sales growth.
Guidance
The company pulled its financial forecast for 2020 due to the global uncertainty caused by the coronavirus pandemic.
Disclosure: I do not hold any positions in the stocks mentioned.
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