Mr. Market has got Levi’s all wrong, one of its top executives exclusively told Yahoo Finance.
Levi’s brand is “strong” and seeing “momentum” across the globe, the company’s Chief Financial officer Harmit Singh said on Yahoo Finance’s The First Trade on Wednesday.
One can’t blame the market for perhaps misunderstanding Levi’s second quarter as a public company, however. Nor for sending the stock down a sharp 11% in early trading Wednesday.
Levi’s reported second quarter sales of $1.31 billion Tuesday evening, beating analyst forecasts for $1.29 billion. Earnings crossed the newswires at $0.07 a share, falling short of estimates of $0.12 a share. But Levi’s said excluding some $29 million in costs related to its late March IPO — which are one-time in nature — actual earnings tallied $0.17 a share.
Singh confirmed that adjusted earnings number in our interview. That’s obviously better than Wall Street expected.
But Levi’s sales trends at U.S. wholesale accounts — mostly department stores — did fall 2%. That shouldn’t be a shocker to anyone investing in the retail space and in fact, it’s stronger than most rivals, according to industry sources. Even still, that result — and more cautious commentary on the outlook for wholesale by CEO Chip Bergh on the analyst conference call — likely spooked some investors.
Singh said the department store channel remains challenging.
More broadly though, Levi’s checked a bunch of boxes as a brand well-positioned to win in an ultra competitive apparel space. Operating income growth for Levi’s Americas, European and Asia segments excluding volatile currency swings outpaced sales growth. Always a good sign for a retailer. Sales of men’s products rose 6%, women’s surged 16%, bottoms gained 8% and tops spiked 14%.
Sales of cut-off shorts alone exploded 50% due to Levi’s positioning at the popular Coachella. Levi’s reported that inventory levels continue to be healthy.
“The company delivered another quarter of solid top-line growth despite a challenging backdrop,” wrote veteran retail analyst Robert Drbul at Guggenheim Securities. “We believe the Levi’s brand commands a modest premium given its increasing strength and several growth opportunities, globally, with several brand equity management efforts ongoing (Coachella and ‘Stranger Things’ partnerships, to name a few).”
Who are you to bet against Coachella, cut-off shorts and denim jackets?