Levi Straus reports Q3 fiscal results
Shares of denim maker Levi Straus soared more than 9% and jumped 12% on extended trading on Tuesday after the company reported online sales growth of 52%, which helped offset losses elsewhere in the business during the fiscal third quarter. The company expects the strong performance will continue into the holiday quarter, even as it called for sales to be down 14% to 15% year over year during the period, assuming the pandemic does not worsen. Here is a look at the results and analyst recommendations.
Earnings report
Levi Strauss & Co. stock jumped more than 12% in the extended session Tuesday after the retailer swung to a surprise quarterly profit and reported quarterly sales well above expectations, thanks to its online sales.
Levi Strauss said its finances continued to improve into the current quarter. The company said it earned $27 million, or 7 cents a share, in the third quarter, compared with $124 million, or 30 cents a share, in the year-ago period.
Adjusted for one-time items, the company earned $31 million, or 8 cents a share. Sales fell to $1.1 billion from $1.5 billion a year ago. Analysts polled by FactSet had expected a GAAP loss of 30 cents a share on sales of $822 million in the quarter. The company said it was cash-flow positive in the quarter, “reflecting the company’s focus on financial discipline, cost controls, cash, and working capital.”
The company also said it will stop paying a dividend in the fourth quarter, but it aims to resume payouts in 2021, should the positive trends continue. CEO Chip Bergh cited recent investments in building out Levi’s direct-to-consumer business for the stronger-than-expected performance. The company also gained market share in the key women’s apparel category where it relied less on promotions to move merchandise off shelves.
Sales
Levi’s third-quarter sales fell 27% due to coronavirus pandemic-related store closures, and net income tumbled 78%. But the declines were less than the company had anticipated, topping internal targets.
Net sales fell 29% in the Americas, 16% in Europe, and 42% in Asia
Globally, digital revenue which includes sales on its websites as well as its wholesale partners like Amazon, grew 50% year over year and made up about 24% of third-quarter sales — double year-ago levels.
Sales from Levi.com alone were up 52%, as customers flocked to Levi’s website for back-to-school denim and tees. The company noted online sales have remained strong, even as stores reopen during the pandemic.
The company noted progress during the quarter selling more to women — items like crop tops and tattered denim shorts. Women’s apparel in 2015 was just 20% of Levi’s total business and has grown to 37% today. Levi’s said its longer-term target for the women’s category is 50% of total sales.
How did the stock move?
At Tuesday’s market close, Levi’s shares were down about 22% this year. The company has a market cap of roughly $6 billion.
The stock closed trading at $14.74 a share on Tuesday and was trading at a pre-market price of $16,53 at the time of writing on Wednesday.
What analysts are saying?
According to CNN Business, 10 analysts offering 12-month price forecasts for Levi Strauss & Co have a median target of 18.00, with a high estimate of 23.00 and a low estimate of 11.00. The median estimate represents a +22.20% increase from the last price of 14.73.
The current consensus among 10 polled investment analysts is to Buy stock in Levi Strauss & Co. This rating has held steady since June, when it was unchanged from a Buy rating, according to CNN Business.