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Levi Strauss beats Q3 expectations, revenue tops highest estimates

Levi Strauss released its third quarter earnings report after hours on Tuesday, beating investor expectations on top and bottom lines. The company said it expects to ‘continue to be significantly adversely impacted’ by the coronavirus for 2020 with impacts to its inventory and by garnering other additional charges. Yahoo Finance’s Jared Blikre breaks down the company’s earnings report on The Final Round.

Video Transcript

SEANA SMITH: Welcome back to "The Final Round." We have some breaking news here after hours. Levi is out with its earnings report. Shares jumping here after hours, up just around 11%. Jared Blikre has more on this for us. Jared?

JARED BLIKRE: That's right. The stock had been up as much as 12, and this is on a huge beat on revenue. Topped the best estimate, so that third quarter revenue came in at $1.1 billion versus estimates of much lower, 822.3 million. And e-commerce revenue, that's up 52% year-over-year. Investors have liked those kinds of numbers when they come out elsewhere, and they're saying that total digital business has doubled as a share of total net revenue.

Now, their adjusted gross margin increased 60 basis points to 53.6%, much higher than the estimate of 51.1%. And their expenses, SG&A, declined 19%. They already had been enacting some cost-saving actions. That's reflecting it. And then they also returned to positive adjusted free-- free cash flow generation in the third quarter, and that was 183 million. Had dipped into the red briefly, but that was only for a quarter.

Also, total available liquidity, $2 billion. Cash at the end of the quarter was $1.4 billion. And a quick quote here from the CFO saying, "Costs and working capital actions have put us on a clear and accelerated path to achieving our adjusted EBITDA margin North Star of at least 12% when revenues recover to pre-COVID levels." And they're expecting results of operations will continue to be significantly adversely impacted for at least the balance of 2020.

There does remain the possibility of additional COVID-19-related inventory and other charges. The call is starting at 5:00 PM. That's just in a few minutes. And just checking out the price action in Levi, let's look at it. This is over the last month. You can see up 18% year-to-date. Nice bounce off the March lows. Well actually, for the most part, the April lows, I'll say, right here, still down 24% year-to-date.