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Levi Strauss Records Strong 4th-Quarter Results on Robust Online Growth

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GuruFocus.com
·3 min read
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- By Mayank Marwah

Levi Strauss Co. (NYSE:LEVI) released its fourth-quarter earnings after the market closed on Jan. 27. The company recorded higher than expected earnings and revenue for the quarter as strong online sales negated sales loss due to pandemic-related store closures. However, results were down on a year-over-year basis.

Performance at a glance


The San Francisco-based manufacturer of denim products posted adjusted earnings per share of 20 cents, which exceeded analysts' expectations of EPS of 15 cents. Revenue of $1.39 billion tumbled 12% on a year-over-year basis, but edged past estimates of $1.34 billion.

Reflecting on the company's performance, executive vice president and chief financial officer Harmit Singh said:


"We delivered strong results through the last months of our fiscal year despite the ongoing impact of the pandemic, including beating our revenue and Adjusted EPS expectations while posting a record fourth-quarter gross margin. While the future impact of COVID-19 remains uncertain in the near term, our sequentially-improving performance, financial discipline and focus on operational excellence have given us the confidence in our ability to execute our strategies against the things within our control, and, if conditions do not worsen, return the company to pre-pandemic revenues by the end of 2021, with Adjusted EBIT margins of twelve percent or more."



E-commerce sales grew 34% in the reported quarter and accounted for 23% of the company's total quarterly revenue. The growth includes both sales on Levi.com and its wholesale partners like Amazon (NASDAQ:AMZN).

The company noted its wholesale channel sales dropped 15% in the reported quarter, while the direct-to-consumer business fell 5%.

At the end of the quarter, the company had total liquidity of about $2.3 billion. In addition, the company has another $714 million available under its revolving credit facility.

A closer look

The company reported sales declines in all regions as stores remained shut for the majority of the quarter due to the coronavirus outbreak. Sales fell 12% in the U.S., 9% in Europe and 14% in Asia. Online sales in all the segments were strong, but not enough to make up for the loss of sales due to store closures.

The company's women's business flourished during the quarter, courtesy of robust demand for blouses, shorts and jeans. Presently, women's apparel account for 37% of Levi's total sales, up from 20% in 2015. The company strategizes to boost the women's category such that it accounts for 50% of the top line in the long term.

The jeans maker reported in July that it would cut 700 jobs, which is equal to 15% of its global corporate workforce, in an effort to trim costs. Berg said that the move would result in annual savings of $100 million.

Guidance

For the first quarter of 2021, the clothing company is guiding for earnings of around 20 cents to 24 cents per share. This is lower than the Thomson Reuters consensus estimate of 33 cents.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.