Shares of apparel manufacturer Levi Strauss & Co. LEVI surged nearly 10% on Wednesday morning following the release of its third-quarter results on Tuesday evening.
The San Francisco-based company, which is known worldwide for its denim jeans, posted adjusted earnings of 8 cents per share, topping Refinitiv analysts' estimates of a loss of 22 cents per share. Revenue declined 27% from the prior-year quarter to $1.06 billion, but still surpassed expectations of $822.2 million.
By region, net sales were down 29% in the Americas, 16% in Europe and 42% in Asia.
While net sales and net income, which tumbled 78%, were impacted by the closure of retail stores in the wake of the Covid-19 pandemic, its digital revenue, including sales on its website as well as through wholesale partners like Amazon AMZN, grew 50% year over year. Levi Strauss reported that sales on its website alone increased 52% as customers ordered back-to-school clothes and noted that online sales have remained strong even as stores began to reopen.
Levi's also recorded a 29% decline in wholesale revenue, while direct-to-consumer sales, which encompass both the company's owned stores and its website, were down 22%.
Despite the declines, President and CEO Chip Bergh attributed the strong quarterly performance to Levi's recent investments in building out its direct-to-consumer business, which he said are "already paying off." He also noted the company recorded an increase in market share in the women's apparel category and relied less on promotions to sell merchandise.
"And the brand has gotten even stronger during the pandemic," he added.
While Levi's expects its business to be significantly hurt for the remainder of the year, Executive Vice President and Chief Financial Officer Harmit Singh noted that inventory levels are "healthy" heading into the holiday season. During the conference call, management said the strong performance is expected to continue, but projections are for holiday sales to be down 14% to 15% compared to the same period last year if the pandemic does not worsen. It also expects fourth-quarter profitability to be about flat to slightly up compared with the prior year.
Levi Strauss is also ceasing dividend payments for the next several quarters, but plans to resume them in 2021 if the positive trends continue.
With a market cap of $6.28 billion, shares of Levi Strauss were trading around $15.84 on Wednesday. GuruFocus estimates the stock has fallen nearly 20% year to date.
Disclosure: No positions.
Read more here:
- Howard Marks' Firm Buys Stake in Garrett Motion
- Steven Cohen Ups Stake in Blank Check Company Netfin Acquisition
- Jana Partners Continues to Whittle Down HD Supply Position
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
