Levi Strauss sales and profit dip in Q4

Levi Strauss & Co., for its fourth quarter reported net revenues decline of 2 percent on a reported basis, and flat on a constant-currency basis excluding 16 million dollars in unfavourable currency effects to 1,569 million dollars. Gross profit of 851 million dollars rose 1 percent on a reported basis, while gross margin of 54.3 percent of net revenues was up 110 basis-points. The company said in a statement that adjusted net income decreased 10.3 million dollars and adjusted diluted earnings per share were 26 cents, compared to 30 cents for the same prior-year period. The company added that increase in the company’s share count resulting from the IPO, in combination with missing the benefit of Black Friday in the current year, adversely impacted the year-over-year adjusted diluted earnings per share comparison by four cents.

Commenting on the results, Chip Bergh, President and Chief Executive Officer of Levi Strauss & Co. said: “We delivered 6 percent revenue growth for the year on a constant-currency basis, at the high end of our expectations. Underlying fourth quarter organic revenue growth met our expectations in spite of being masked by Black Friday falling in fiscal 2020. We outperformed our fourth-quarter expectations in US wholesale, gross margin and EPS. And we announced our eighth consecutive annual dividend increase.”

Review of Levi Strauss’ Q4 performance

The company said that its direct-to-consumer net revenues were flat on a constant-currency basis in the fourth quarter, as expansion and improved performance of the retail network and e-commerce growth were offset by the lack of a Black Friday benefit in the current year, which adversely impacted the year-over-year direct-to-consumer net revenues growth comparison by 7 percentage points, and the total company net revenues growth comparison by about 2 percentage points. Net revenues from the company’s wholesale business declined 1 percent on both a reported and constant-currency basis, as a 4 percent decline in the US wholesale was partially offset by growth in Europe. The acquisition of a South American distributor adversely impacted the company’s year-over-year wholesale net revenues growth comparison by about 1 percentage point, and the total company net revenues growth comparison by about half-a-point.

In the Americas, net revenues declined 5 percent on both a reported and on a constant-currency basis. The region’s direct-to-consumer net revenues declined 7 percent, reflecting the lack of a Black Friday benefit in the current year. The region’s wholesale net revenues declined 4 percent, primarily reflecting reduced shipments to the off-price channel in 2019, the Dockers line reset in the second half of 2018, and the impact of an acquisition of a South American distributor in 2019.

In Europe, net revenues grew 5 percent on a reported basis and 8 percent on a constant-currency basis, reflecting continued broad-based growth in both direct-to-consumer and wholesale channels across the region. The lack of a Black Friday benefit in the current year adversely impacted the total region’s year-over year net revenues growth comparison by about 3 percentage points. In Asia, net revenues grew 1 percent on a reported basis and 2 percent on a constant-currency basis, primarily reflecting growth in the direct-to-consumer channel. Revenue growth across most of the region’s markets was partially offset by declines in Hong Kong, reflecting the unrest there, and in India, a seasonal shift in the timing of shipments; these headwinds collectively adversely impacted the total region’s year-over-year net revenues growth comparison by about 4 percentage points.

Adjusted EBIT for the quarter declined 3 percent on a reported basis and 2 percent on a constant-currency basis as compared to the prior year. Adjusted EBIT margin was 9.3 percent, 20 basis-points lower than the prior year on a reported basis, due to the lack of a Black Friday benefit in the current year, which adversely impacted the year-over-year Adjusted EBIT margin comparison by about 70 basis points.

Levi Strauss posts 3 percent revenues growth in FY19

Full year net revenues of 5.8 billion dollars grew 3 percent on a reported basis and 6 percent on a constant-currency basis. The company added that lack of a Black Friday benefit in the fourth quarter and the acquisition of a South American distributor in 2019 adversely impacted the company’s year-over-year net revenues growth comparisons by about 1 percentage point. The company’s direct-to-consumer net revenues grew 10 percent on a constant-currency basis due to performance and expansion of the retail network and e-commerce growth; the company’s retail network had 81 more company-operated stores at the end of 2019 than a year prior.

Wholesale net revenues grew 2 percent on a reported basis and 4 percent on a constant-currency basis, reflecting international growth partially offset by a 3 percent decline in US wholesale net revenues. Gross margin was flat on a reported basis. Adjusted EBIT of 611 million dollars increased 4 percent on a reported basis and 8 percent on a constant-currency basis as a result of higher net revenues. Adjusted EBIT margin was 10.6 percent, flat compared to prior year on a reported basis, and 20 basis points higher than the prior year on a constant-currency basis.

The company further said, net income of 395 million dollars increased from 285 million dollars in the prior year due to a charge in 2018 from the impact of the change in tax law in the United States. Adjusted net income of 456 million dollars increased 9 percent as compared to the prior year. Diluted earnings per common share were 97 cents compared to 73 cents for 2018. Adjusted diluted earnings per share for 2019 increased 4 cents to 1.12 dollars; excluding the 5 cent unfavourable impact of currency translation, adjusted diluted earnings per share increased 9 cents.

Levi Strauss expects to report 7 percent revenue growth in 2020

The company’s expectations for fiscal 2020 include net revenues growth of around 7 percent in constant-currency, and around 6 percent in reported dollars; adjusted EBIT margin expansion in the range of 30-40 basis points on both a constant-currency and a reported basis; adjusted diluted EPS in the range of 1.18 dollars to 1.22 dollars on a reported basis; and nearly 100 new company-operated store openings on a gross basis, in addition to 80 stores the company will take over from the its acquisition in South America; and dividends in the range of 130 million dollars, an increase of approximately 14 percent as compared to 2019, which are anticipated to be paid quarterly.

The company’s board of directors has declared its first dividend for fiscal 2020 of 8 cents per share, payable on or about February 21, 2020, to all holders of Class A and Class B common stock as of February 12, 2020.

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