Levi Strauss & Co. fell in late trading as profit in its second quarter as a public company was weighed down by higher advertising expenses, currency headwinds and lingering costs related to its IPO.

• The denim maker on Tuesday posted second-quarter profit of 7 cents a share, missing analysts’ estimates. Its earnings were hit by US$29 million of expenses associated with the company’s IPO, among other higher costs.

Key Insights

• Levi has been working to bolster its retail network and e-commerce sales, and said its direct-to-consumer business increased 9% last quarter, mostly due to those efforts. But that growth comes at a cost, with higher investment spending.
• The push in international markets is paying off as revenue increased in Europe and Asia as well as in the Americas. Chief Executive Officer Chip Bergh said the Levi brand grew in all three regions across men’s, women’s, tops and bottoms, showing its expansion beyond denim in taking hold.
• Levi slightly raised its fiscal 2019 guidance for net revenue growth to the high end of the mid-single digit range. It also said constant-currency adjusted EBIT margins will be in the range of 10 basis points, up from a previous forecast of flat-to-slightly up.

Market Reaction

• Levi shares fell as much as 7.6 per cent to US$21.87 in late trading. The stock has advanced 39% since the IPO through Tuesday’s close.