Levi Strauss issued dismal steerage for its present fiscal yr on Wednesday, because the denim maker grapples with unfavorable foreign money trade charges, one fewer promoting week and a loss in income from its Denizen and footwear companies.
The corporate mentioned it expects gross sales to say no between 1% and a pair of%, nicely behind estimates of three.7% development, in line with LSEG.
It additionally anticipates adjusted earnings per share might be between $1.20 and $1.25, under estimates of $1.37, in line with LSEG.
Shares fell about 6% in prolonged buying and selling.
CEO Michelle Gass instructed CNBC the anticipated drop in income within the present fiscal yr doesn’t mirror slower demand, however is extra because of the foreign money traits, one fewer fiscal week and the divested companies.
Levi ended fiscal 2024 on a excessive notice and reported earnings and gross sales that each topped expectations.
Right here is how the attire firm fared throughout its fiscal fourth quarter in contrast with what Wall Avenue was anticipating, based mostly on a survey of analysts by LSEG:
- Earnings per share: 50 cents adjusted vs. 48 cents anticipated
- Income: $1.84 billion vs. $1.73 billion anticipated
The corporate’s reported web earnings for the three-month interval that ended Dec. 1 was $182.6 million, or 46 cents per share, in contrast with $126.8 million, or 32 cents per share, a yr earlier. Excluding one-time bills associated to impairments, restructurings, acquisitions and leases, amongst different gadgets, Levi reported adjusted web earnings of $202 million, or 50 cents per share, in contrast with adjusted income of $179 million, or 44 cents per share, a yr earlier.
Gross sales rose to $1.84 billion, up about 12% from $1.64 billion a yr earlier. Natural gross sales, which exclude an additional 53rd week Levi had throughout the quarter, together with international trade results and divested companies, grew 8%.
Since Gass took the helm of Levi a yr in the past, she has moved swiftly to chop features of the enterprise that weren’t working, develop greater margin gross sales on its web site and shops, increase profitability and produce extra feminine prospects to the model. Beneath her management, Levi inked a high-profile advertising and marketing partnership with Beyonce in September after she launched a track concerning the model on her album “Cowboy Carter” earlier within the yr.
“After all, we’ve got to acknowledge the Beyonce impact. We’re more than happy with the launch of that marketing campaign, which we’re seeing drive demand throughout the enterprise,” Gass mentioned in an interview with CNBC.
Gass has been working to deliver extra girls to Levi, which historically has drawn extra males, as a result of girls are likely to spend extra money and store for brand spanking new garments extra typically. Girls’s attire is now about 36% of Levi’s total enterprise, up barely from a yr in the past, however Gass mentioned it ought to signify about half over time.
The corporate has gained feminine customers over not solely with free and wide-legged denim matches, but in addition with a variety of recent tops akin to woven shirts and blouses.
In the course of the quarter, Levi noticed sturdy gross sales will increase throughout all of its areas, manufacturers and channels. Gross sales within the Americas grew 12%, Europe elevated 15% and Asia expanded 9%. Gross sales for its Past Yoga model spiked 10%. Direct-to-consumer gross sales elevated 19% and made up 45% of whole natural web gross sales, which incorporates the additional promoting week, foreign money fluctuations and the divested companies.
Wholesale revenues, which have been smooth throughout the trade, grew 7% throughout the quarter.
Since President Donald Trump was elected for a second time period, all eyes have been on the retail trade to see what sort of impact his proposed tariffs may have on shopper costs and firm income.
Levi’s finance chief Harmit Singh mentioned the corporate sources its merchandise from 25 nations and fewer than 1% of it comes from China, which Trump has threatened with 10% tariffs. In Canada and Mexico, the place Trump has instructed duties as excessive as 25%, Levi’s publicity is minimal, because it solely imports about 5% of merchandise from Mexico and nothing from Canada.
When requested if the corporate will increase costs if broad-based tariffs are applied, Singh mentioned it plans to work with its suppliers and take a look at its personal prices so it could possibly spare shoppers as a lot as doable.
The “first goal could be to attenuate the affect on the buyer. So we work internally with our suppliers, we take a look at our value base, we take a look at different pricing alternatives and if we can’t cowl it, clearly we received to guard the structural economics of the enterprise,” mentioned Singh. “At that time, we’ll resolve, you recognize, what ought to be handed on to the buyer or not, however we can’t begin from that. That is the place we are going to finish.”
In the course of the quarter, Levi posted what it referred to as a report gross margin of 61.3%, up from 57.8% within the year-ago interval, pushed by decrease product prices, greater full worth gross sales and a greater combine between direct and wholesale income.
Nonetheless, Levi reported $111.4 million in impairment fees associated to its Past Yoga model for fiscal 2024, on high of the $90.2 million it reported in fiscal 2023, bringing these prices to $201.6 million within the years because it acquired the athleisure firm in 2021 for $400 million.
The model and yoga class total is rising, however Singh mentioned Levi was probably a bit “aggressive” in its expectations “of how rapidly the model may develop.”
The excellent news, he mentioned, is Past Yoga is now led by Nancy Inexperienced, the previous CEO of Hole‘s Athleta, who’s credited with scaling the athleisure model right into a billion-dollar enterprise.
“It is a class that is rising huge time. I do know there are different rivals, however we be ok with the administration staff and good concerning the potential development for the enterprise,” mentioned Singh.
