Levi Strauss Co. (LEVI, Financial) released its first-quarter earnings after the market closed on April 8. The company recorded higher than expected earnings and revenue for the quarter as strong online sales negated sales loss due to pandemic-related store closures. However, results were down on a year-over-year basis.
Performance at a glance
The San Francisco-based manufacturer of denim products posted adjusted earnings per share of 34 cents, which exceeded analysts' expectations of EPS of 25 cents. Revenue of $1.31 billion tumbled 13% on a year-over-year basis but edged past estimates of $1.25 billion.
Reflecting on the company's performance, CEO Chip Bergh said:
"Our strong results this quarter were driven by faster-than-expected recovery in our business from our relentless focus on the priorities that are driving outsized performance. We continue to lean into our strategies – leading with our brands, investing in direct-to-consumer and diversifying our business – while still operating prudently to manage the ongoing uncertainty, especially in Europe. As the vaccine rollout continues and consumer excitement returns, I am more confident than ever that we will emerge from the pandemic a stronger business and drive sustainable, profitable growth."
E-commerce sales grew 41% in the reported quarter and accounted for 26% of the company's total quarterly revenue. The growth includes both sales on Levi.com and its wholesale partners like Amazon (AMZN, Financial).
The company noted its wholesale channel sales dropped 4% in the reported quarter, while the direct-to-consumer business fell 26%.
At the end of the quarter, the company had total liquidity of about $2.8 billion. This included the $689 million available under the company's revolving credit facility.
A closer look
The company reported sales declines in all regions as it kept its stores shut for the majority of the quarter due to the Coronavirus pandemic. Sales fell 14% in the U.S., 16% in Europe and 5% 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.
The company's women's business flourished during the quarter, courtesy of robust demand for blouses, shorts and jeans. Presently, women's apparel account for 37% of Levi's total sales, up from 20% in 2015. The company strategizes to boost the women's category such that it accounts for 50% of the top line in the long term.
The jeans maker reported in July 2020 that it would cut 700 jobs, which is equal to 15% of its global corporate workforce, in an effort to trim costs. Bergh said that the move would result in annual savings of $100 million.
Guidance
For the first half of the year, the clothing company is guiding for adjusted earnings of around 41 cents to 42 cents per share. Sales are projected to rise by 24% to 25%.
Disclosure: I do not hold any positions in the stocks mentioned.
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