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Levi Strauss' (LEVI) Q3 Earnings Beat Mark, Revenues Rise Y/Y
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Levi Strauss & Co. (LEVI - Free Report) reported mixed third-quarter fiscal 2022 results, wherein earnings beat the Zacks Consensus Estimate and sales missed the same. LEVI’s adjusted earnings of 40 cents a share outpaced the Zacks Consensus Estimate of 37 cents. However, quarterly earnings decreased 16.7% from the year-ago fiscal quarter’s level. The bottom line excludes an adverse currency impact of 4 cents a share.
Shares of this San Francisco, CA-based player have decreased 3.9% in the past three months, wider than the industry’s 1.3% fall.
Q3 Metrics
Net revenues of $1,517 million came below the Zacks Consensus Estimate of $1,615 million. However, the metric inched up 1% and 7% on constant-currency basis year over year on the back of strength in the Levi's and Dockers brands. The top line excludes $76 million of adverse currency impacts.
Direct-to-consumer (DTC) net revenues grew 2% year over year or 8% on a constant-currency basis, buoyed by constant-currency company-operated e-commerce increase of 16%. As a rate of quarterly revenues, sales from DTC stores and e-commerce accounted for 29% and 6%, respectively, for a total of 35%. Further, wholesale net revenues rose 1% and 6% on a constant-currency basis, backed by gains from global demand for the Levi's brand. LEVI’s global digital net revenues increased 9% year over year, comprising nearly 21% of third-quarter fiscal 2022 revenues.
Segment wise, net revenues in the Americas rose 3% year over year to $805 million, while in Europe, the metric decreased 19% to $390 million and that in Asia, surged 36% to $221 million. LEVI’s newly-formed Other Brands segment, consisting of Dockers and Beyond Yoga, reported revenues of $101 million, increasing 37% year over year.
Image Source: Zacks Investment Research
Margins & Costs
Adjusted gross profit came in at $945.6 million, significantly up from $752.8 million recorded in the year-ago fiscal quarter. Adjusted gross margin of 56.9% contracted 60 basis points (bps) year over year. Adverse currency exchange accounted for nearly half of the decline, while the balance shows the impact of increased product costs and reduced full-priced sales. This was partly offset by higher prices and a favorable channel mix.
Adjusted SG&A ascended 5.6% to $675.4 million, and as a rate of revenues, adjusted SG&A rose 180 bps to 44.5%, reflecting elevated investments in IT and DTC business as well as increased distribution expenses.
Adjusted EBIT came in at $188 million, down 15% from the year-earlier fiscal quarter’s figure. Also, adjusted EBIT margin of 12.4% fell 240 bps year over year on lower gross margin.
Other Financials
Levi Strauss ended the quarter with cash and cash equivalents of $498.9 million and short-term investments in marketable securities of $100.5 million, plus a total liquidity of $1.4 billion.
As of Aug 28, 2022, long-term debt and total shareholders’ equity were $963.5 million and $1,828.9 million, respectively. Total inventories rose 43% year over year to $1,292.3 million. During the nine months of fiscal 2022, cash from operations was $210.3 million. This currently Zacks Rank #4 (Sell) LEVI’s adjusted free cash flow was a negative $11.9 million during the same period.
During the fiscal third quarter, Levi Strauss repurchased 26 million shares, reflecting 1.5 million shares retired. LEVI also paid out dividends of $48 million.
Outlook
Owing to the significant currency headwinds from the stronger U.S. dollar, and a cautious outlook for North America and Europe due to macroeconomic woes and persistent supply-chain disruptions, management adjusted its projections for fiscal 2022.
Levi Strauss now projects reported net revenue growth of 6.7-7%, indicating 11.5-12% growth on a constant-currency basis.
Management envisioned adjusted earnings per share of $1.44-$1.49, inclusive of incremental currency headwinds of $0.0 since last reported in July.
Nonetheless, management believes that LEVI remains well poised to accomplish the long-term outlook. The outlook assumes no major worsening of the pandemic, inflationary pressures, supply-chain disruptions or currency woes.
The Zacks Consensus Estimate for Ulta Beauty’s fiscal 2022 sales suggests growth of 13.7% from the corresponding year-ago level. ULTA has a trailing four-quarter earnings surprise of 32.8%, on average.
Buckle, a leading retailer of apparel, footwear and accessories has a Zacks Rank of 2 (Buy) at present. BKE has a trailing four-quarter earnings surprise of 12.7%, on average.
The Zacks Consensus Estimate for Buckle’s fiscal 2022 sales and earnings per share (EPS) suggests growth of 6.8% and 4.5%, respectively, from the year-ago corresponding figures.
Designer Brands, the leading footwear and accessories designer, presently has a Zacks Rank #2.
The Zacks Consensus Estimate for Designer Brands’ fiscal 2022 sales and EPS suggests growth of 6.9% and 23.5%, respectively, from the corresponding year-ago levels. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.
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Levi Strauss' (LEVI) Q3 Earnings Beat Mark, Revenues Rise Y/Y
Levi Strauss & Co. (LEVI - Free Report) reported mixed third-quarter fiscal 2022 results, wherein earnings beat the Zacks Consensus Estimate and sales missed the same. LEVI’s adjusted earnings of 40 cents a share outpaced the Zacks Consensus Estimate of 37 cents. However, quarterly earnings decreased 16.7% from the year-ago fiscal quarter’s level. The bottom line excludes an adverse currency impact of 4 cents a share.
Shares of this San Francisco, CA-based player have decreased 3.9% in the past three months, wider than the industry’s 1.3% fall.
Q3 Metrics
Net revenues of $1,517 million came below the Zacks Consensus Estimate of $1,615 million. However, the metric inched up 1% and 7% on constant-currency basis year over year on the back of strength in the Levi's and Dockers brands. The top line excludes $76 million of adverse currency impacts.
Direct-to-consumer (DTC) net revenues grew 2% year over year or 8% on a constant-currency basis, buoyed by constant-currency company-operated e-commerce increase of 16%. As a rate of quarterly revenues, sales from DTC stores and e-commerce accounted for 29% and 6%, respectively, for a total of 35%. Further, wholesale net revenues rose 1% and 6% on a constant-currency basis, backed by gains from global demand for the Levi's brand. LEVI’s global digital net revenues increased 9% year over year, comprising nearly 21% of third-quarter fiscal 2022 revenues.
Segment wise, net revenues in the Americas rose 3% year over year to $805 million, while in Europe, the metric decreased 19% to $390 million and that in Asia, surged 36% to $221 million. LEVI’s newly-formed Other Brands segment, consisting of Dockers and Beyond Yoga, reported revenues of $101 million, increasing 37% year over year.
Image Source: Zacks Investment Research
Margins & Costs
Adjusted gross profit came in at $945.6 million, significantly up from $752.8 million recorded in the year-ago fiscal quarter. Adjusted gross margin of 56.9% contracted 60 basis points (bps) year over year. Adverse currency exchange accounted for nearly half of the decline, while the balance shows the impact of increased product costs and reduced full-priced sales. This was partly offset by higher prices and a favorable channel mix.
Adjusted SG&A ascended 5.6% to $675.4 million, and as a rate of revenues, adjusted SG&A rose 180 bps to 44.5%, reflecting elevated investments in IT and DTC business as well as increased distribution expenses.
Adjusted EBIT came in at $188 million, down 15% from the year-earlier fiscal quarter’s figure. Also, adjusted EBIT margin of 12.4% fell 240 bps year over year on lower gross margin.
Other Financials
Levi Strauss ended the quarter with cash and cash equivalents of $498.9 million and short-term investments in marketable securities of $100.5 million, plus a total liquidity of $1.4 billion.
As of Aug 28, 2022, long-term debt and total shareholders’ equity were $963.5 million and $1,828.9 million, respectively. Total inventories rose 43% year over year to $1,292.3 million. During the nine months of fiscal 2022, cash from operations was $210.3 million. This currently Zacks Rank #4 (Sell) LEVI’s adjusted free cash flow was a negative $11.9 million during the same period.
During the fiscal third quarter, Levi Strauss repurchased 26 million shares, reflecting 1.5 million shares retired. LEVI also paid out dividends of $48 million.
Outlook
Owing to the significant currency headwinds from the stronger U.S. dollar, and a cautious outlook for North America and Europe due to macroeconomic woes and persistent supply-chain disruptions, management adjusted its projections for fiscal 2022.
Levi Strauss now projects reported net revenue growth of 6.7-7%, indicating 11.5-12% growth on a constant-currency basis.
Management envisioned adjusted earnings per share of $1.44-$1.49, inclusive of incremental currency headwinds of $0.0 since last reported in July.
Nonetheless, management believes that LEVI remains well poised to accomplish the long-term outlook. The outlook assumes no major worsening of the pandemic, inflationary pressures, supply-chain disruptions or currency woes.
Solid Picks in Retail
Some better-ranked stocks are Ulta Beauty (ULTA - Free Report) , Buckle (BKE - Free Report) and Designer Brands (DBI - Free Report) .
Ulta Beauty, the leading beauty retailer, presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ulta Beauty’s fiscal 2022 sales suggests growth of 13.7% from the corresponding year-ago level. ULTA has a trailing four-quarter earnings surprise of 32.8%, on average.
Buckle, a leading retailer of apparel, footwear and accessories has a Zacks Rank of 2 (Buy) at present. BKE has a trailing four-quarter earnings surprise of 12.7%, on average.
The Zacks Consensus Estimate for Buckle’s fiscal 2022 sales and earnings per share (EPS) suggests growth of 6.8% and 4.5%, respectively, from the year-ago corresponding figures.
Designer Brands, the leading footwear and accessories designer, presently has a Zacks Rank #2.
The Zacks Consensus Estimate for Designer Brands’ fiscal 2022 sales and EPS suggests growth of 6.9% and 23.5%, respectively, from the corresponding year-ago levels. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.