Levi Strauss & Co. (LEVI, Financial) released its second-quarter results after the market closed on July 9. While the company’s earnings underperformed analysts’ estimates, it edged past revenue expectations. The company attributed the low earnings to its costly public listing in March along with mounting advertising expenses.
Key metrics
The denim maker reported adjusted earnings of 7 cents per share, missing estimates of 12 cents. Revenue came in at $1.31 billion, up 5.4% from the prior-year quarter. Analysts were anticipating revenue of $1.29 billion.Ă‚
"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,” CEO Chip Bergh said.
U.S. wholesale business declines
Levi Strauss’ wholesale business posted a 2% sales decline, owing to the ongoing weakness in the retail sector. This business accounts for one-third of the company’s global revenue.
In response to the weakness in the wholesale unit, the company has been investing in both its online business and retail outlets. Its persistent efforts to boost its retail network and online sales led to 9% quarterly sales growth in the direct-to-consumer business. The company is also broadening its presence in markets like China, India and Brazil.
Segment revenue
Sales inched up 3% in the Americas, 9% in Europe and 6% in Asia in the second quarter. Levi’s sales in China jumped 3%. However, the company noted its business in China was "far from its potential" and had "significant untapped opportunity."
Financial forecast
The company also provided fiscal 2019 guidance.
Levi Strauss guided for net sales growth on a constant-currency basis to be at the high end of the mid-single-digit range. Additionally, the jeans manufacturer said it estimates its constant-currency adjusted earnings before interest and taxes margins to be around 10 basis points higher.
The company anticipates capital spending to be between $190 million and $200 million. It plans to open nearly 100 new company-operated stores in fiscal 2019.
Disclosure: I do not hold any positions in the stocks mentioned.
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