Levi Strauss & Co. second quarter net revenues were 1.5 billion dollars, an increase of 15 percent on a reported basis, and 20 percent on a constant-currency basis excluding 47 million dollars in unfavourable currency impacts.
Net income decreased to 50 million dollars due to the decrease in operating income, while adjusted net income rose to 117 million dollars due to the increase in adjusted EBIT and lower interest expense, partially offset by higher income taxes.
Diluted earnings per share decreased to 12 cents, while adjusted diluted earnings per share increased to 29 cents due to increased adjusted net income offset by a 2 cents impact from currency translation.
"Our second quarter results demonstrate the power of our strategy, which continues to support strong revenue growth and margin expansion," said Chip Bergh, president and chief executive officer of Levi Strauss & Co.
Highlights of Levi Strauss financial results
The company’s DTC net revenues increased 16 percent, driven by company-operated stores. As a percentage of second quarter company net revenues, sales from DTC stores and e-commerce comprised 30 percent and 7 percent, respectively, for a total of 37 percent.
Wholesale net revenues increased 15 percent reflecting strong demand for the Levi's brand globally.
The company’s global digital net revenues grew approximately 3 percent compared to the same period in the prior year and comprised approximately 20 percent of second quarter fiscal 2022 net revenues.
Gross profit was 855 million dollars compared to 750 million dollars in the same quarter of the prior year. Gross margin was 58.1 percent of net revenues compared to 58.8 percent in the same quarter of the prior year. Adjusted gross margin was 58.2 percent, flat compared to the same period in the prior year.
Operating income was 76 million dollars compared to 107 million dollars in the same quarter of the prior year. The company said adjusted EBIT, excluding Russia-Ukraine, COVID and acquisition-related charges, was 145 million dollars compared to 115 million dollars in the same quarter of the prior year due to higher net revenues partially offset by increased investments to support growth.
"Although the operating environment remains dynamic, the diversity of our business is providing the resilience and flexibility needed to drive solid financial results in fiscal year 2022, while progressing us on our path to achieve net revenues of 9 to 10 billion dollars and adjusted EBIT margin of 15 percent by fiscal year 2027," added Harmit Singh, chief financial officer of Levi Strauss & Co.
Levi Strauss Q2 performance across geographies
In the Americas, the company’s net revenues grew 17 percent on a reported and constant-currency basis, driven by growth across both wholesale and DTC channels.
DTC net revenues in the Americas increased 13 percent due to strength in company-operated mainline and outlet stores. Wholesale net revenues grew 19 percent, driven by the Levi’s brand, particularly in the U.S. Net revenues through all digital channels grew 17 percent and represented 18 percent of the segment's sales in the quarter.
In Europe, net revenues grew 3 percent on a reported basis and 15 percent on a constant-currency basis. DTC net revenues increased 23 percent, driven by strength in company-operated outlets and mainline stores.
Wholesale net revenues in Europe decreased 10 percent on a reported basis and were flat on a constant-currency basis. Net revenues through all digital channels declined 30 percent and represented 23 percent of the segment's sales in the quarter.
In Asia, net revenues increased 16 percent on a reported basis and 21 percent on a constant-currency basis. The increase in net revenues was driven by both our wholesale and DTC channels and most markets outside of China.
DTC net revenues in Asia increased 2 percent driven by strength in the company-operated mainline stores. Wholesale net revenues increased 35 percent driven by growth across most markets. Net revenues through all digital channels grew 17 percent and represented 15 percent of the segment's sales in the quarter.
For Other Brands, Dockers and Beyond Yoga combined, net revenues and operating income increased, reflecting growth across channels for the Dockers brand, which was up 23 percent, and the acquisition of Beyond Yoga, which had net revenues of approximately 23 million dollars.
In the second quarter, the company returned approximately $80 million to shareholders, including dividends of 40 million dollars, representing a dividend of 10 cents per share, up 64 percent from prior year and share repurchases of 40 million dollars, reflecting two million shares retired.
In June 2022, the company’s board of directors approved a 750 million dollars share repurchase program with no expiration date. The company declared a dividend of 12 cents per share totaling approximately 48 million dollars, payable in cash on August 17, 2022 to the holders of record of Class A common stock and Class B common stock at the close of business on August 1, 2022.
Reaffirming its expectations for fiscal 2022, the company said net revenue is expected to grow 11 percent to 13 percent compared to FY 2021, between 6.4 billion and 6.5 billion dollars and adjusted diluted EPS of 1.50 dollars to 1.56 dollars.