Levi Strauss & Co. (LEVI) Reports Superior First Quarter 2022 Results

An employee holds a shopping bag while calling a customer at the Levi Strauss & Co. flagship store in San Francisco on March 18, 2019.

David Paul Morris | Bloomberg | Getty Images

Denim retailer Levi Strauss & Co. on Tuesday reported fiscal first-quarter earnings and revenue that beat analysts’ estimates as it sold more of its higher-priced jeans and T-shirts, often directly to clients.

Levi also reaffirmed his forecast for fiscal year 2022, assuming there is no significant worsening of inflationary pressures or shutdown of global economies. It factored in any impact from its recent decision to temporarily suspend operations in Russia, which accounts for around 2% of its total sales.

The retailer has yet to see consumers redeem for cheaper clothes, even though everything from gas prices to grocery bills, Levi CEO Chip Bergh told CNBC in a phone interview. . And yet, while the company has raised prices on some items to offset other expenses within the business, consumer demand has remained strong, he added.

To be sure, Bergh said Levi is watching consumer demand closely, knowing that projections of an impending recession are rising among economists. “We don’t have our head in the sand,” the CEO said. “If we see [demand] begin to falter, we will take appropriate action.”

Here’s how Levi did for the three months ended Feb. 27 compared to what Wall Street expected, based on a Refinitiv analyst survey:

  • Earnings per share: 46 cents adjusted vs. 42 cents expected
  • Income: $1.59 billion vs $1.55 billion expected

Levi reported net income of $196 million, or 48 cents per share, compared with net income of $143 million, or 35 cents per share, a year earlier. Excluding one-time items, it earned 46 cents a share, better than the 42 cents analysts were looking for.

Revenue rose 22% to $1.59 billion from $1.31 billion a year earlier. This exceeded expectations by $1.55 billion.

Levi said it took about $60 million from sales due to supply chain constraints in the last period. Its global direct-to-consumer sales increased 35% over the prior year period, and wholesale revenue increased 15%.

As Levi continues to partner with big-box retailers like Target and department stores like Macy’s to sell its jeans, the company has increasingly pushed customers to its own physical stores and website. Not only can these transactions be more profitable, but it allows Levi to build stronger relationships with buyers and gather more insight into their browsing habits. Direct-to-consumer sales accounted for 39% of total sales in the quarter, down from 38% in the prior period and 36% a year ago, the company said.

Broken down by region, sales were up 26% in the Americas, 13% in Europe and 11% in Asia on an annual basis.

Levi reaffirmed its outlook for fiscal 2022, which calls for revenue growth of between 11% and 13% year-over-year. Analysts had forecast an increase of 11.8%.

The retailer still sees its annual earnings per share to be between $1.50 and $1.56, compared to analysts’ outlook of $1.54.

“The denim category is experiencing double-digit growth [rate] compared to pre-pandemic,” CFO Harmit Singh told CNBC, saying “the world continues to get a lot more laid back.”

Singh added: “We saw demand in March maintaining momentum, and that gives us confidence for the rest of the year.”

Find the full press release on Levi’s results here.

This story is developing. Please check for updates.

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