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Here's How Levi Strauss (LEVI) is Poised Ahead of Q1 Earnings

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Levi Strauss & Co. (LEVI - Free Report) is likely to register top- and bottom-line decline when it reports first-quarter fiscal 2021 numbers on Apr 8. Although the Zacks Consensus Estimate for its first-quarter earnings has been stable at 24 cents over the past 30 days, the same suggests a plunge of about 40% from 40 cents delivered in the year-ago quarter. Moreover, the consensus estimate for quarterly revenues stands at $1,250 million, which indicates a decline of 17% from the year-ago quarter’s tally.

In the last-reported quarter, the company delivered an earnings surprise of 42.9%. Notably, this apparel company has an earnings surprise of 47.7%, on average, for the trailing four quarters.

Key Factors to Note

Levi Strauss’ first-quarter performance has most likely been hurt by the coronavirus pandemic. Management, at its fourth-quarter earnings call on Jan 27, cautioned about the resurgence of the virus. Consequently, it envisioned net revenues, earnings and cash flows to be significantly impacted, for at least the first half of fiscal 2021. Levi Strauss projected first-quarter revenue decline by a high-teens percentage at constant currency.

Management also notified about the store closures in first-quarter fiscal 2021. As a result, it expected earnings to take a hit of 10-12 cents a share. The company further informed that the year-earlier quarter witnessed the minimal impact of COVID-19 and also had Black Friday. These factors might have adversely affected results in the to-be-reported quarter. Levi Strauss guided first-quarter adjusted earnings in the band of 20-24 cents a share.

Despite these limitations, we are encouraged about the company’s omni-channel initiatives. Levi Strauss intends to increase investments in own retail stores and e-commerce businesses. Impressively, the company has also been accelerating new omni capabilities, including Buy Online, Pick-up In Store, line-queuing, same-day delivery, appointment scheduling, and mobile checkout. The company has also rolled out additional payment options like Afterpay across all its stores in the United States and expanded ship-from-store capability to Canada, the U.K. and Germany. Furthermore, the company’s next-gen stores offering digitally-connected experience and strength in brands, appear encouraging.

Management had earlier stated that growth of direct-to-consumer business will prove accretive to gross margin and overall profitability. It had anticipated adjusted gross margin expansion of 100 basis points for the quarter under review.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Levi Strauss this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Levi Strauss & Co. Price and EPS Surprise

Levi Strauss & Co. Price and EPS Surprise

Levi Strauss & Co. price-eps-surprise | Levi Strauss & Co. Quote

Although Levi Strauss has a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Tapestry (TPR - Free Report) currently has an Earnings ESP of +41.29% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Builders FirstSource (BLDR - Free Report) has an Earnings ESP of +19.84% and a Zacks Rank #3, presently.

Costco (COST - Free Report) has an Earnings ESP of +0.06% and a Zacks Rank of 3.

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