Shares of Levi Strauss & Co. (LEVI, Financial) plummeted 7.61% to $21.86 in after-hours trading on Tuesday after missing consensus estimates on GAAP earnings and revenue for the second quarter of fiscal 2019.
GAAP earnings per share were 7 cents versus expectations of 38 cents. GAAP earnings per share decreased 63.2% year-over-year due to the sustainment of expenses connected with the initial public offering in March 2019.
Revenue came in at $1.31 billion compared to $1.43 billion forecast. Revenue was nearly 5% higher than the prior-year quarter thanks to growth reported across all regions.
The Americas segment grew 3% to $693 million, Europe increased 9% to $398 million and Asia went up 6% to $222 million.
Unfavorable foreign exchange and the postponement of promotion and advertising expenses to the second quarter from the previous quarter caused a 4% drop in adjusted Ebit to $81.6 million for an Ebit margin of 6.2%. The Ebit margin was 6.8% in the comparable quarter of 2018.
The San Francisco-based worldwide clothing company also noted a 6% increase in revenue to $2.75 billion, 200% growth in net income to $175 million and 8% rise in adjusted Ebit to $288 million for the year to date.
“Our second quarter and first half results reflect the continued strength of our diversified business model as we delivered broad-based growth across all brands, regions and key product categories despite a challenging retail and macroeconomic environment,” president and CEO Chip Bergh said. “For both periods, the Levi’s brand grew in all three regions across men’s, women’s, tops and bottoms and maintained its position at the center of culture through iconic products and consumer experiences.”
For full fiscal 2019, Levi Strauss & Co. forecasted that, on constant currency, net revenues will grow at the upper limit of the mid-single digit percentage range, and adjusted Ebit margin will be slightly up around 10 basis points. In addition, the company expects to open about 100 new stores and to sustain capital expenditures of $190 million to $200 million.
The balance sheet had $940.7 million in cash on hand and short-term securities, $895.3 million in total inventories and $1.02 billion in total debts as of May 26. The equity was worth $1.32 billion.
The share price is up 3% since its initial public offering to $23.7 at close Tuesday for a market capitalization of $9.29 billion.
The 14-day relative strength index is 68, suggesting the stock is neither overbought nor oversold.
Wall Street issued an overweight recommendation rating for shares of Levi Strauss & Co. with an average price target of $25.14.
Levi Strauss & Co. does not pay a dividend.
Disclosure: I have no positions in any security mentioned.
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