Levi Strauss Quarterly Sales Rise 15% Despite Strong Dollar

Scott Peters
07 Jul, 2022
New York City

Levi Strauss, the popular maker of jeans, said earnings were hurt by the strong dollar but sales benefitted from the growing trend of casual Friday all week. 

The apparel company's results offer rare positive news when many other retailers are struggling with unwanted inventories and sharp fall in operating margins. 

Levi Strauss & Company said revenues in the second quarter ending in May increased 15% to $1.47 billion and rose 20% on a constant currency basis. 

Net income in the quarter declined 23% to $50 million from $65 million a year ago and earnings per share dropped to 12 cents from 16 cents. 

Revenues in the Americas rose 17% to $776 million both in nominal and constant currency terms. 

Direct sales through company operated stores rose 13% and wholesale revenues rose 19%.  

Net revenues through all digital channels grew 17% and represented 18% of the segment's sales in the quarter.

Revenues in Europe increased barely 3% to $367 million but were up 15% on a constant currency basis. 

Wholesale net revenues decreased 10% on a reported basis and were flat on a constant-currency basis.

Online sales in Europe declined 30% following over 100% growth in the same period a year ago and represented 23% of the segment's sales in the quarter.

Revenues in Asia rose 16% to $222 million and jumped 21% on a constant currency basis. 

Gross margin edged slightly lower to 58.1% from 58.8% and operating margin dropped to 5.1% from 8.3% a year ago. 

Selling and administration expenses soared to $779 million from $644 million a year ago primarily linked to closing of the operation in Russia. 

Levi recorded a one-time charge of $60 million related to the Russia-Ukraine crisis after the company suspended its Russia operation in March.

 

Inventories Rise Driven By Core Products 

Inventories soared 29% at the end of the quarter to $1.1 billion and said the increase is driven by the company strategy to build core inventory and meet customer needs during the time of supply chain disruptions. 

 

Share Repurchase and Dividend 

In the second quarter, the San Francisco based company returned $80 million to shareholders - $40 million in share buyback and $40 million through 10 cents a share dividend. 

 

Guidance and Outlook 

The company guided higher sales and earnings despite the headwinds from the rising dollar. 

Net revenues are estimated between $6.4 billion and $6.5 billion, an increase of 11% to 13% and adjusted diluted earnings per share between $1.50 and $1.56.

 

Company and Stock 

Levi Strauss & Company, headquartered in San Francisco, California, listed its stock at $17 a share on March 21, 2019 in a public offering. 

The company operated as a publicly listed company between 1971 and 1985 when the company decided to go private in a leveraged buyout. 

Levi Strauss & Company closed up 4% to $16.41 in the regular market and extended gains by 4.1% to $17.07 in after hours trading.