Levi Strauss Q3 Earnings Beat Estimates, DTC Revenues Rise 10%
Levi Strauss & Co. LEVI reported third-quarter fiscal 2024 results, wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.
LEVI’s adjusted earnings of 33 cents per share outpaced the consensus estimate of 31 cents. Quarterly earnings increased 17.9% from 28 cents per share in the year-ago quarter.
Net revenues of $1,517 million lagged the Zacks Consensus Estimate of $1,552 million. The metric was almost flat year over year on a reported basis and rose 2% on a constant-currency basis.
Find latest EPS estimates and surprises on Zacks Earnings Calendar.
LEVI has initiated a formal review of alternatives for its Dockers brand, which is likely to include a potential sale or other strategic deal. The company has not made a deadline or definitive timetable for the completion of this review process. Also, there is no assurance that the process will lead to any transaction or outcome.
Shares of this San Francisco, CA-based player have gained 20.4% year to date compared with the industry’s 11% growth.
LEVI’s Quarterly Performance: Key Metrics & Insights
This Zacks Rank #3 (Hold) company’s direct-to-consumer (DTC) net revenues climbed 10% on a reported basis and 12% on a constant-currency basis, driven by a 12% jump in the United States and 9% growth in Europe. Net revenues from e-commerce increased 16% on a reported basis and 18% on a constant-currency basis. DTC accounted for 44% of the overall revenues in the fiscal third quarter.
Wholesale revenues dropped 6% on a reported basis and 4.7% on a constant-currency basis. Other Brands’ revenues fell 7% on a reported basis and 5% on a constant-currency basis. Dockers revenues tumbled 15% on a reported basis and 13% on a constant-currency basis. Beyond Yoga revenues grew 19% on both reported and constant-currency basis.
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In the Americas, revenues dipped 1.2% on a reported basis but jumped 0.2% on a constant-currency basis. In Europe, revenues increased 5.9% on a reported basis and 6.6% on a constant-currency basis. In Asia, revenues were up 0.3% on a reported basis and 3.7% on a constant-currency basis, buoyed by growth across the majority of the markets.
The gross margin of 60% expanded 440 basis points (bps) year over year, thanks to lower product costs and positive channel and brand mix.
Adjusted selling, general and administrative (SG&A) expenses were $735.3 million, up from $701.7 million in the year-earlier quarter. Adjusted SG&A margin was 48.5%, up from 46.4% in the year-ago quarter. Adjusted EBIT was $175.4 million, up 27.3% from $137.8 million in the year-ago fiscal quarter.
Levi Strauss’ Other Financial Updates
Levi Strauss ended the quarter with cash and cash equivalents of $577.1 million and total liquidity of $1.3 billion.
As of Aug. 25, 2024, long-term debt and total shareholders’ equity were $1 billion and $1.9 billion, respectively. During the first nine months of fiscal 2024, cash generated from operations was $601.1 million and adjusted free cash flow was $439.3 million.
The company returned nearly $69 million to shareholders in the fiscal third quarter, a 45% raise from the previous year. This comprised dividends of $52 million and share repurchases of $18 million, including 1 million shares retired.
Management declared a cash dividend of 13 cents per share, totaling $52 million, payable Nov.
14, 2024, to the holders of record as of Oct. 29, 2024.
At the end of the reported quarter, the company had $621 million left in its existing share repurchase authorization with no expiration date.
What to Expect From LEVI in FY24?
Management projects reported net revenues to be up 1% year over year and constant-currency revenues to grow 1.5-2%.
The company envisions adjusted earnings per share to be at the midpoint of its earlier guided $1.17-$1.27.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie ANF, Boot Barn BOOT and Deckers DECK.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s current financial-year sales indicates growth of 13.1% from the year-ago figure. ANF delivered an earnings surprise of 16.8% in the last reported quarter.
Boot Barn, a leading footwear, apparel and accessories retailer, presently flaunts a Zacks Rank of 1. BOOT delivered an average earnings surprise of 7.1% in the trailing four quarters.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 11.6% from the year-ago figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 47.2% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 11.5% from the year-ago figure.
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Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
Levi Strauss & Co. (LEVI) : Free Stock Analysis Report