Levi Strauss & Co.’s (LEVI) shares took a tumble in after-hours trading following the release of the company’s third-quarter financial results. While the earnings per share (EPS) surpassed analyst expectations, the overall revenue came in slightly below predictions.
Here’s a breakdown of the report’s key takeaways:
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Earnings Beat:
Levi Strauss reported quarterly earnings of 33 cents per share, exceeding the analyst consensus estimate of 31 cents.*
Revenue Miss:
However, the company’s quarterly revenue of $1.516 billion missed the analyst consensus estimate of $1.55 billion.*
Direct-to-Consumer Strength:
The Direct-to-Consumer (DTC) business, a key focus for Levi Strauss, showed continued growth with a 10% increase on a reported basis and a 12% increase on a constant-currency basis. This growth was driven by strong performance in both the U.S. (12% increase) and Europe (9% increase).*
Wholesale Decline:
On the other hand, wholesale net revenues declined by 6% on a reported basis and 5% on a constant-currency basis. Adjusting for the exit of the Denizen business, wholesale net revenues fell by 3%.*
Operating Margin:
Operating margin came in at 2.0%, compared to 2.3% in the same quarter last year, including an impairment charge of $111 million related to the Beyond Yoga acquisition.*
Gross Margin Expansion:
Gross margin saw a significant increase of 440 basis points to 60% from 55.6% in the same quarter last year. This was primarily driven by lower product costs and favorable channel and brand mix.Despite the mixed results, Levi Strauss remains positive about the future. “The underlying fundamentals of our business are getting stronger, driven by the Levi’s® brand, which grew 5% globally in Q3, a significant acceleration from H1 and the highest revenue growth in two years,” said Michelle Gass, CEO of Levi Strauss & Co. The company is making progress on its strategic priorities, including double-digit growth in its direct-to-consumer business, continued positive performance in the U.S., and growth in Europe.
Looking ahead, Levi Strauss anticipates fiscal year 2024 adjusted earnings at a mid-point of between $1.17 and $1.27 per share, slightly above the current analyst estimate of $1.25.
Following the earnings announcement, LEVI shares experienced a sharp decline in after-hours trading, dropping 6.22% to $19.75. The stock had already fallen 2.86% during Wednesday’s regular trading session.
