Levi Strauss & Co. LEVI reported first-quarter fiscal 2025 results, wherein earnings per share (EPS) beat the Zacks Consensus Estimate. However, sales slightly lagged the consensus mark. Nevertheless, both metrics improved year over year.
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Management has highlighted that 2025 has kicked off a solid start, and its shift to be a DTC-first company is driving the strategic and financial value.
Direct-to-Consumer (“DTC”) has been a key growth driver, backed by positive comp growth, new openings and robust e-commerce performance. LEVI posted positive comps for the 12th straight time in the reported quarter. Its innovation pipeline is also robust. Levi Strauss’ Signature value brand registered 19% growth in this quarter, backed by strength in seasonal fit.
Levi, one of the world's largest brand-name apparel companies and a global leader in jeans wear in the Americas, Europe and Asia, posted quarterly adjusted EPS of 38 cents, which beat the Zacks Consensus Estimate of 28 cents and surged 52% from 25 cents reported in the prior-year period.
Net revenues of $1.53 billion marginally lagged the Zacks Consensus Estimate of $1.54 billion. However, the metric jumped 3% year over year on a reported basis and 9% on an organic basis.
Levi Strauss & Co. Price, Consensus and EPS Surprise
Levi Strauss & Co. price-consensus-eps-surprise-chart | Levi Strauss & Co. Quote
DTC net revenues reflected an increase of 9% on a reported basis and 12% on an organic basis to $787.5 million. Organic DTC growth was backed by a rise of 8% in the United States, 11% in Europe and 14% in Asia. E-commerce net revenues were up 13% on a reported basis and 16% on an organic basis. In the fiscal first quarter, DTC accounted for 52% of the overall net revenues.
Wholesale net revenues dipped 3% on a reported basis to $739.3 million. The metric rose 5% on an organic basis. Beyond Yoga revenues grew 10% on both reported and organic basis.
The Zacks Consensus Estimate for DTC and Wholesale channels is pegged at $794 million and $749 million, respectively, for the fiscal first quarter.
In the Americas, revenues increased 6% on a reported basis and 11% on an organic basis, backed by double-digit growth in both DTC and wholesale channels. Within the Americas, revenues in the United States rose 8% on an organic basis, fueled by the high single-digit increase in both channels. In Mexico, revenues were up 6% on higher traffic in the stores and e-commerce growth. In Europe, revenues fell 5% on a reported basis but rose 3% on an organic basis.
In Asia, revenues were up 7% on a reported basis and 10% on an organic basis. DTC revenues rose 14%, driven by double-digit growth in the major markets such as Japan, Korea and Turkey. The company’s business in South Asia, the Middle-East and Africa, including India, grew double-digits on better in-store retail experiences, improved conversion rates and growth in wholesale units. Its business in China was flat year over year and management anticipates modest expectations in the current fiscal year as progress to reset this market is ongoing.
LEVI’s Margins & Expenses
The gross profit increased 8.9% year over year to $947.6 million. The gross margin expanded 330 basis points (bps) to 62.1% in the fiscal first quarter. This growth was primarily buoyed by lower product costs, including savings from Project Fuel initiatives, a favorable channel mix and brand mix.
Operating margin was 12.5%, up from 0.04% in the year-ago period. Adjusted EBIT margin jumped 400 bps to 13.4% compared with 9.4% in the last year, driven by gross margin expansion.
Adjusted SG&A edged up 1.7% to $744 million, reflecting increased distribution expenses. However, as a percentage of revenues, adjusted SG&A leveraged 70 bps to 48.7%.
Levi’s Other Financial Snapshots
Levi’s ended the quarter with cash and cash equivalents of $574.4 million and total liquidity of $1.4 billion. As of March 2, 2025, long-term debt and total shareholders’ equity were $987.4 million and $2.03 billion, respectively. Total inventories jumped 7% on a dollar basis.
In first-quarter fiscal 2025, net cash generated from operating activities was $52.5 million and adjusted free cash flow was $14.1 million.
In the fiscal first quarter, the company returned nearly $81 million to its shareholders through dividends and share repurchases, up 12% year over year. This included dividends of $51 million, representing a dividend of 13 cents per share and approximately $30 million in share repurchases, retiring 1.6 million shares. At the quarter end, LEVI had $560 million remaining in its existing share repurchase authorization, with no expiration date.
Management has announced a cash dividend of 13 cents per share, totaling roughly $51 million. This is payable on May 9 to its shareholders of record of Class A common stock and Class B common stock as of April 24, 2025.
What to Expect From LEVI in FY25?
The outlook for fiscal 2025 is based on the continuing operations, with the Dockers business now reported as discontinued operations. We note that the company’s guidance for the current fiscal year is unchanged except to reflect the Dockers business in discontinued operations. Management is prudent with respect to the global wholesale and anticipates the channel to be flat in fiscal 2025 on an organic basis. International growth is also a significant opportunity for the company.
LEVI’s fiscal second-quarter guidance remains consistent with its internal plan. The fiscal second quarter is seasonally the company’s lowest quarter for revenues and margins in the year. The tariff impact is likely to have a minimal impact on the margin structure in the impending quarter. For the fiscal second quarter, it projects organic net revenue growth from continued operations of 3.5-4.5%, excluding nearly 2 points of foreign exchange headwinds and 1.5 points related to the exit of Denizen and footwear business.
Gross margin is expected to be up between 80 bps and 100 bps, and adjusted EBIT margin is likely to be in the band of 5.5-6%. Adjusted EPS is envisioned to be 11-13 cents, reflecting about 3 cents of headwind from foreign exchange and a higher tax rate year over year.
Considering such expectation, the company’s profitability assumptions will be significantly higher, approximately 20% compared with the first half of fiscal 2024. For fiscal 2025, reported net revenues are still expected to decline 1-2%, while organic net revenues are anticipated to grow between 3.5% and 4.5%. Gross margin is now predicted to expand 100 bps to 61.6%. Adjusted EBIT margin is now anticipated to expand to 11.4-11.6%, up from 10.9-11.1% guided earlier. This shows an expansion of 70-90 bps from a 10% base. It expects a tax rate of about 23%. Adjusted earnings per share are forecasted in the band of $1.20 to $1.25, incorporating an estimated 20-cent impact of foreign exchange and a higher tax rate.
Shares of this Zacks Rank #3 (Hold) company have lost 14.2% in the past three months compared with the industry’s decline of 30.4%.
Key Picks in Retail
We have highlighted three better-ranked stocks, namely Gap GAP, Boot Barn BOOT and Urban Outfitters URBN.
Gap, clothing and accessories retailer, currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Gap’s current financial-year sales indicates growth of 1.6% from the year-ago figure. GAP delivered an average earnings surprise of 77.5% in the trailing four quarters.
Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, presently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 14.9% from the year-ago figure. The company delivered a trailing four-quarter earnings surprise of 7.2%, on average.
Urban Outfitters, a fashion lifestyle specialty retailer, currently carries a Zacks Rank of 2. URBN delivered an average earnings surprise of 28.4% in the trailing four quarters.
The consensus estimate for Urban Outfitters’ current financial-year sales indicates growth of 6.6% from the year-ago figure.
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