An employee holds a grocery bag while calling a customer at the Levi Strauss & Co flagship store. in San Francisco, March 18, 2019.
David Paul Morris | Bloomberg | Getty Images
Levi Strauss & Co. reported a double-digit sales decline for the fiscal first quarter on Thursday as continued store closings in Europe and lighter foot traffic in the US weighed on earnings following the Covid pandemic.
But the denim maker raised its sales and earnings outlook for the first half of the year, assuming the global health crisis doesn’t get worse from here. CFO Harmit Singh said in an interview with CNBC that the company expects sales to return to pre-pandemic levels by the fourth quarter of 2019.
Its shares were up more than 6% in out-of-hours trading.
“These results point to really good evidence that we will emerge from the pandemic as a stronger company,” CEO Chip Bergh told CNBC. “We exceed our own expectations internally [and] exceed external expectations, despite the fact that a third of our stores in Europe are closed for the entire quarter. “
Here’s how the company fared for the quarter ended Feb. 28, compared to what analysts expected, based on a survey by Refinitiv:
- Earnings per share: 34 cents adjusted versus 25 cents expected
- Revenue: $ 1.31 billion vs. $ 1.25 billion expected
Levi’s net income fell slightly to $ 142.5 million, or 35 cents a share, from $ 152.7 million, or 37 cents a share, a year earlier. Excluding one-off costs, the company earned 34 cents a share, better than the analyst predicted 25 cents, Refinitiv said.
Total sales fell approximately 13% to $ 1.31 billion from $ 1.51 billion a year earlier. That came out better than the analyst predicted $ 1.25 billion.
The retailer said the double-digit sales decline year over year was mainly due to reduced pedestrian traffic in its stores during the pandemic, as well as continued store closings in some markets where Covid restrictions have remained in place. In Europe, for example, more than 40% of Levi’s stores are currently closed, while others operate shorter hours, the company said.
Levi’s wholesale sales fell 4% in the last quarter, an improvement over the previous period.
Sales direct to consumers fell 26% as fewer customers visited Levi’s stores and especially in markets that rely on tourism. The decline was partially offset by a 25% increase in the company’s e-commerce sales during the quarter, Levi’s said. Total online sales, including digital sales from wholesale partners, increased 41%.
While trends in the business are improving, revenues and sales are expected to be “significantly adversely affected at least through the second quarter of 2021,” Levi’s said.
The company raised its outlook for both sales and profits in the first half of the year, assuming the pandemic does not worsen.
Sales are now expected to grow 24% to 25%, and adjusted revenues are expected to be between 41 cents and 42 cents, implying a 7 cent to 8 cent gain during the fiscal second quarter. Analysts asked for a second-quarter profit of 5 cents a share.
Levi’s shares are up nearly 25% so far. The company has a market capitalization of $ 10 billion.
Find Levi’s full press release here.