Levi Strauss posts Q1 sales growth of 6 percent

First quarter net revenues of 1.7 billion dollars at Levi Strauss & Co. increased 6 percent on a reported basis and 9 percent on a constant-currency basis excluding 40 million dollars in unfavourable currency impacts.

The company has reaffirmed its expectations for fiscal 2023 of net revenues between 6.3 billion dollars and 6.4 billion dollars, reflecting reported revenue growth of 1.5 percent to 3 percent and adjusted diluted EPS of 1.30 dollars to 1.40 dollars.

"Our first quarter results reflect the strength of our brands and the progress we are making against our strategic priorities," said Chip Bergh, president and chief executive officer of Levi Strauss & Co., adding, "We delivered strong growth in our international business and record-breaking revenue performance in our direct-to-consumer channel. This past quarter in the U.S., we were the market share leader among the key 18 to 30-year-old consumer, and we continued to grow share in our women’s denim bottoms business, further narrowing the gap to number one."

Highlights of Levi Strauss results

The company’s DTC net revenues increased 12 percent on a reported basis and 16 percent on a constant-currency basis, driven by broad-based growth in both company-operated stores and e-commerce across all segments. E-commerce increased 11 percent on a reported basis and 14 percent on a constant-currency basis. As a percentage of first quarter company net revenues, sales from DTC stores and e-commerce comprised 33 percent and 9 percent, respectively, for a total of 42 percent.

Wholesale net revenues increased 2 percent on a reported basis and 4 percent on a constant-currency basis, driven by strong growth in Asia and Canada, as well as growth in the U.S.

Gross profit was 942 million dollars compared to 944 million dollars last year. Gross margin was 55.8 percent down from 59.3 percent, while adjusted gross margin was also 55.8 percent, down 360 basis points.

Operating income was 157 million dollars compared to 234 million dollars last year, while adjusted EBIT was 185 million dollars compared to 238 million dollars last year. Adjusted EBIT margin was 11 percent, 390 basis points lower on a reported basis, and 380 basis points lower on a constant-currency basis.

Net income was 115 million dollars compared to 196 million dollars last year, due to the decrease in operating income, while adjusted net income was 135 million dollars compared to 189 million dollars last year.

Diluted earnings per share were 29 cents compared to 48 cents last year and adjusted diluted earnings per share were 34 cents compared to 46 cents last year.

The company paid a dividend of 12 cents per share, up nearly 20 percent from prior year; approximately 56 million dollars in capital returned to shareholders.

Review of Levi Strauss’ performance across core markets

In the Americas, the company’s net revenues grew 7 percent on reported and constant-currency bases, driven by both DTC and wholesale channels. DTC net revenues increased 15 percent driven by strength in the company-operated mainline and outlet stores and e-commerce. Wholesale net revenues grew 4 percent, driven by growth of the Levi’s brand in Canada and the U.S.

In Europe, net revenues decreased 3 percent on a reported basis. On a constant-currency basis, net revenues increased 2 percent, including a 4% negative impact from the suspension of the company’s business in Russia. DTC net revenues increased 4 percent on a reported basis and 8 percent on a constant-currency basis, or 19 percent excluding Russia. Wholesale net revenues decreased 8 percent on a reported basis and 3 percent on a constant-currency basis.

In Asia, net revenues increased 12 percent on a reported basis and 22 percent on a constant-currency basis. The increase in net revenues was driven by all markets outside China. DTC net revenues increased 15 percent on a reported basis and 25 percent on a constant-currency basis, driven by strength in the company-operated mainline and outlet stores and e-commerce. Wholesale net revenues increased 9 percent on a reported basis and 19 percent on a constant-currency basis.

For Other Brands, Dockers and Beyond Yoga combined, net revenues increased 24 percent on a reported basis and 25 percent on a constant-currency basis. Dockers was up 28 percent on a reported basis and 29 percent on a constant-currency basis. Beyond Yoga was up 11 percent on reported and constant-currency bases.