Popular denim icon Levi Strauss & Co (NYSE: LEVI) reported Q4 earnings after market close on Wednesday, topping analyst expectations on top and bottom ends. The retailer has benefited from price hikes throughout its product range due to offsetting business costs and is increasing its direct-to-customer sales which results in higher revenue. There was limited positive reaction to the earnings release, with LEVI stock currently trading at a daily loss of 4%.
The market reaction was somewhat surprising given the fact that the company also reaffirmed its forecast for 2022, factoring in temporary business suspension in Russia and assuming no significant inflationary increase. It seems that tightening consumer spending hasn’t quite hit Levi fans, as customer demand remained strong despite the company raising prices.
Levi reported EPS of $0.46 adjusted, topping the Street expectation of $0.42. Similarly, revenue came in at $1.59B, again nudging ahead of a $1.55 consensus. The company explained it took a $60M hit to sales thanks to supply chain constraints but noted that its direct-to-consumer sales rose by an impressive 35%. This is a visionary milestone for Levi; whilst partnerships with large retailers such as Target help with exposure and sales consistency, sales from the company stores result in higher profit margins and stronger relationships with shoppers.
In terms of the FY22 outlook, Levi reaffirmed its previous estimates of revenue growth between 11% and 13%, coming in line with analyst projections of an 11.8% increase. EPS is expected to be between $1.50 and $1.56, with analysts predicting $1.54. It seems that in spite of global pressures, shortages, and uncertain sentiment, the denim industry is unwavering. Harmit Singh, CFO of Levi Strauss commented:
“The denim category is growing in a low-double-digit [rate] relative to where it was before pandemic…the world continues to become a lot more casual.”
Demand remains stable, and hence Levi is well-positioned for the rest of FY22. LEVI shares are currently down 23.5% year over year.
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Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.