Levi Strauss issued dismal steering for its present fiscal yr on Wednesday, because the denim maker grapples with unfavorable forex change charges, one fewer promoting week and a loss in income from its Denizen and footwear companies.
The corporate mentioned it expects gross sales to say no between 1% and a couple of%, effectively behind estimates of three.7% development, in line with LSEG.
It additionally anticipates adjusted earnings per share will likely be between $1.20 and $1.25, beneath estimates of $1.37, in line with LSEG.
Shares fell about 4% in prolonged buying and selling.
CEO Michelle Gass instructed CNBC the anticipated drop in income within the present fiscal yr doesn’t mirror slower demand, however is extra because of the forex tendencies, one fewer fiscal week and the divested companies.
Levi ended fiscal yr 2024 on a excessive observe and reported earnings and gross sales that each topped expectations.
This is how the attire firm fared throughout its fiscal fourth quarter in contrast with what Wall Road was anticipating, primarily based on a survey of analysts by LSEG:
- Earnings per share: 50 cents adjusted vs. 48 cents anticipated
- Income: $1.84 billion vs. $1.73 billion anticipated
The corporate’s reported web revenue for the three-month interval that ended Dec. 1 was $182.6 million, or 46 cents per share, in contrast with $126.8 million, or 32 cents per share, a yr earlier. Excluding one-time bills associated to impairments, restructurings, acquisitions and leases, amongst different gadgets, Levi reported adjusted web revenue of $202 million, or 50 cents per share, in contrast with adjusted earnings of $179 million, or 44 cents per share, a yr earlier.
Gross sales rose to $1.84 billion, up about 12% from $1.64 billion a yr earlier. Natural gross sales, which excludes an additional 53rd week Levi had in the course of the quarter, together with international change impacts and divested companies, grew 8%.
Since Gass took the helm of Levi a yr in the past, she has moved swiftly to chop off elements of the enterprise that weren’t working, develop greater margin gross sales on its web site and shops, increase profitability and convey extra feminine prospects to the model. Underneath her management, Levi inked a high-profile advertising partnership with Beyonce in September after she launched a track concerning the model on her album “Cowboy Carter” earlier within the yr.
“In fact, we’ve to acknowledge the Beyonce impact. We’re more than happy with the launch of that marketing campaign, which we’re seeing drive demand throughout the enterprise,” Gass mentioned in an interview with CNBC. “Not only for girls’s.”
Gass has been working to convey extra girls to Levi’s, which historically has drawn extra males, as a result of girls are inclined to spend extra money and store for brand new garments extra usually. Girls’s attire is now about 36% of Levi’s general enterprise, up barely from a yr in the past, however Gass mentioned it ought to characterize about half over time.
The corporate has gained feminine customers over not solely with free and wide-legged denim suits, but in addition a variety of recent tops, reminiscent of woven shirts and blouses.
Through the quarter, Levi noticed robust gross sales will increase throughout all of its areas, manufacturers and channels. Gross sales within the Americas grew 12%, Europe elevated 15% and Asia expanded 9%. Gross sales for its Past Yoga model spiked 10%. Direct-to-consumer gross sales elevated 19% and made up 45% of complete natural web gross sales, which incorporates the additional promoting week, forex fluctuations and the divested companies.
Wholesale revenues, which have been gentle throughout the trade, grew 7% in the course of the quarter.
Since President Donald Trump was elected for a second time period, all eyes have been on the retail trade to see what sort of affect his proposed tariffs might have on client costs and firm earnings.
Levi’s finance chief Harmit Singh mentioned the corporate sources its merchandise from 25 nations and fewer than 1% of it comes from China — which Trump has threatened with 10% tariffs. In Canada and Mexico, the place Trump has advised duties as excessive as 25%, Levi’s publicity is minimal, because it solely imports about 5% of merchandise from Mexico and nothing from Canada.
When requested if the corporate will elevate costs if broad primarily based tariffs are applied, Singh mentioned it plans to work with its suppliers and have a look at its personal prices so it might spare customers as a lot as doable.
The “first goal could be to attenuate the affect on the patron. So we work internally with our suppliers, we have a look at our value base, we have a look at different pricing alternatives and if we can’t cowl it, clearly we acquired to guard the structural economics of the enterprise,” mentioned Singh. “At that time, we’ll determine, , what must be handed on to the patron or not, however we can’t begin from that. That is the place we’ll finish.”