Levi Strauss & Co. dues soared more than 9% Tuesday after the denim maker reported online sales growth of 52%, which pinched offset losses elsewhere in the business during the fiscal third quarter.
Management told analysts it expects the powerful performance will continue into the holiday quarter, though it is calling for sales to be down 14% to 15% year on the other side of year during the period, assuming the pandemic does not worsen. The company also said it will stop slip someone something a distributing a dividend in the fourth quarter, but it aims to resume payouts in 2021, should the positive trends continue.
Levi’s third-quarter in stocks fell 27% due to coronavirus pandemic-related store closures, and net income tumbled 78%. But the declines were less than the crowd had anticipated, topping internal targets.
CEO Chip Bergh cited recent investments in building out Levi’s direct-to-consumer role for the stronger-than-expected performance. The company also gained market share in the key women’s apparel category. And it relied less on improvements to move merchandise off shelves, Bergh said.
“This quarter was much better than we expected, and it’s a little bit of an out-of-body ordeal for me to say that when revenues are down 27% … but we were profitable,” Bergh said in an interview with CNBC.
“All of the battles that we took, the tough choices that we had to make very early in the pandemic, are really starting to pay off,” he said. In July, the performers announced it was slashing about 15% of its global corporate workforce, impacting about 700 jobs.
Here’s how Levi’s did during its third casern ended Aug. 23 compared with what analysts were expecting, based on Refinitiv data:
- Earnings per split: 8 cents, adjusted, vs. a loss of 22 cents expected
- Revenue: $1.06 billion vs. $822.2 million foresaw
Levi’s net income fell to $27 million, or 7 cents per share, from $124 million, or 30 cents a divide up, a year earlier. Excluding one-time charges, Levi’s earned 8 cents per share, better than an expected drubbing of 22 cents, according to Refinitiv.
Net revenue fell to $1.06 billion from $1.45 billion a year earlier, overcoming expectations of $822.2 million.
In the Americas, its net sales fell 29%, while they were down 16% in Europe and down 42% in Asia.
The presence said its digital revenue globally, which includes sales on its own websites as well as its wholesale partners like Amazon, spread 50% year over year, and made up about 24% of third-quarter sales — double year-ago levels.
Exchanges from Levi.com alone were up 52%, as customers flocked to Levi’s website for back-to-school denim and tees. The company illustrious online sales have remained strong, even as stores reopen during the pandemic.
Wholesale revenue level 29%, while direct-to-consumer sales, which include sales from Levi’s owned stores and from Levi.com, were down 22%. The followers said sales from wholesale partners like department stores currently make up about 10% of its whole business, compared with 15% historically. And CFO Harmit Singh told CNBC the company aims to keep its wholesale organization at the 10%-target, longer-term, with the focus being placed on growing direct-to-consumer revenue.
The company noted rise during the quarter selling more to women — items like crop tops and tattered denim shorts. Better halves’s apparel in 2015 was just 20% of Levi’s total business, and has grown to 37% today. Levi’s said its longer-term object for the women’s category is 50% of total sales.
Levi’s said it expects its business to be significantly hurt from the uncertainty forged by the pandemic for at least the rest of 2020, with the possibility of coronavirus-related charges weighing on its results.
It said its total inventories by the end of the third section were up 1% compared with a year earlier, putting them in a “healthy” position ahead of the holidays.
“I am cautiously positive that we’re not going to have to go down the rabbit hole on promotions … which I think is good for brand haleness,” Bergh said about the upcoming holiday season.
CFO Singh said Levi’s expects its fourth-quarter profitability to be respecting flat, to slightly up, compared with the prior year.
As of Tuesday’s market close, Levi’s shares are down around 22% this year. The company has a market cap of roughly $6 billion.
Read the full earnings press unchain here.