Levi Strauss & Co. posted third-quarter profit and sales that topped analysts’ estimates, while revenue in its home market fell, as the company navigates an increasingly crowded denim market.
- Earnings excluding some items amounted to 31 cents a share in the period that ended Aug. 25, compared with the 28-cent average of projections. Revenue also exceeded estimates.
Key Insights
- Denim is experiencing a resurgence and the market is getting more crowded, yet the latest results show Levi is holding its ground. Chief Executive Officer Chip Bergh cited growth in e-commerce and international sales.
- While net revenue climbed in both Europe and Asia, Levi struggled in the Americas, its home and largest market. The company said net revenue fell 3 per cent there because of a decline in the wholesale business.
- “U.S. wholesale continues to be a challenging dynamic for us,” Bergh said in an interview. “The underlying health of our business is really, really strong, and we’re confident in ending the year on a high note.”
- Levi has been building its retail network and e-commerce business, and said direct-to-consumer sales rose 12 per cent on a constant-currency basis. This shows it’s adapting as traditional retailers like department stores lose ground to e-commerce and newer competitors.
- The continuing street protests in Hong Kong led to stores being closed a number of times in the third and fourth quarters, and that cost the Asia region about 1 percentage point in constant-currency revenue growth, Bergh said. “That 12 per cent would have been 13 per cent if it had been business as usual in Hong Kong.”
Market Reaction
- Levi shares swung between gains and losses after the market closed. They were down about 2 per cent at 4:08 p.m. Since the company’s March IPO, the stock had advanced 12 per cent through Tuesday’s close.
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