Denim-apparel giant Levi Strauss & Co. reported a smaller-than-expected impact from the COVID-19 pandemic during the third quarter, with sales and profit coming in above analysts’ projections. The shares rose in late trading.

Net sales fell 27 per cent from a year earlier to US$1.06 billion -- well above the estimate for US$822 million. The company said surging online sales helped make up for lower traffic and store closures. Profit and gross margin also were better than analysts’ projections.

Key Insights

• While the pandemic has had a negative impact across apparel, Levi’s results show some brands are weathering the storm better than others. Chief Financial Officer Harmit Singh said in the company’s statement that revenue has recovered from COVID-19 disruptions “faster than expected.”
• In an interview, Chief Executive Officer Chip Bergh said he expects the fourth quarter to look better than the third quarter -- “barring any unforeseen COVID second wave.” It will take some time, however, before the business returns to the size it was in 2019, he said.
• The San Francisco-based company’s investment in e-commerce is clearly paying off. Web sales grew 52 per cent in the quarter. E-commerce represented almost a quarter of all revenue in the period -- double what it was the prior year. Additionally, Bergh said that actions taken early during the pandemic, such as cutting costs and planning “to be a smaller business in the short term,” have helped the company.
• Inventory rose 1 per cent in the period from a year earlier. Levi said its inventories are healthy as retailers carefully balance the merchandise they have on hand while heading into a holiday season that will look much different from past years.

Market Reaction

• Levi shares jumped as much as 14 per cent in late trading in New York. The stock fell 24 per cent so far this year through Tuesday’s close.