Equities

Levi Strauss & Co. Surges 6.3% After Beating Q1 Earnings Expectations

POSITIVE

Levi Strauss beats Q1 expectations with a 26-cent EPS, raises full-year profit outlook due to strategic cost cuts and DTC growth.

By Bill Bullington

4/3, 17:17 EDT
Levi Strauss & Co
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Key Takeaway

  • Levi Strauss & Co. beats Q1 earnings expectations with a 26 cents EPS, outperforming analyst predictions of 21 cents.
  • Shares surged 6.3% after reporting higher-than-expected profit and sales, driven by strategic cost cuts and DTC growth.
  • Full-year profit guidance raised to $1.17-$1.27 per share, reflecting strong operational efficiency and market-share gains.

Levi Strauss Surpasses Expectations

Levi Strauss & Co. has recently demonstrated a remarkable financial performance, surpassing analyst expectations in the first quarter, which has led to a more optimistic outlook for the full year. The iconic denim retailer's strategic cost-cutting and productivity measures, announced earlier in January, are showing significant returns, alongside notable market-share gains.

Profit and Sales Shine

The company reported adjusted earnings per share of 26 cents, outperforming the average analyst estimate of 21 cents. This achievement is a testament to Levi's robust profitability, as evidenced by its gross margin surpassing expectations in the quarter ending February 25. The shares responded positively, rising 6.3% in late trading in New York, marking a 13% gain this year, significantly outpacing the Dow Jones Industrial Average's advance.

Direct-to-Consumer Strategy Pays Off

Despite a downturn in the wholesale business, Levi's revenue exceeded forecasts, thanks to its focus on direct-to-consumer (DTC) operations, including its own stores and website. The DTC division saw a 7% increase in sales, highlighting the company's successful pivot towards more controlled and profitable sales channels. While wholesale revenue from third-party retail partners experienced an 18% decline, CEO Michelle Gass remains optimistic about this segment's future, emphasizing its importance for extending Levi's reach.

CEO's Vision for Growth

Michelle Gass, who assumed the role of CEO in January, has been instrumental in steering the company towards introducing new styles such as baggy jeans, denim skirts, dresses, and non-denim activewear pants. These initiatives have not only spurred demand but are also beginning to bolster wholesale growth. Gass's strategic focus on product innovation and market expansion underlines her commitment to driving Levi's growth trajectory.

Upward Revision of Full-Year Profit Guidance

In light of the strong first-quarter performance, Levi has raised its full-year profit guidance by 2 cents from its previous forecast, now expecting earnings per share to be in the range of $1.17 to $1.27. CFO Harmit Singh attributed this positive adjustment to improved expense control, showcasing the company's effective management and operational efficiency.