Levi's powers on in second quarter, raises full-year guidance

By

Benjamin Fitzgerald

Published
Jul 11, 2018

Levi Strauss Co. said on Tuesday that revenues continued to rise in the second quarter, roaring forward 17%.

The iconic U.S. brand also reported a quadrupling of net income for the three month period, ending May 27, 2018, and raised its full-year guidance, despite recent news that the EU is considering a tax levy on American denim imports.

Highlighting the positives, the San Francisco-based company delivered its third consecutive quarter of double-digit revenue growth, "driven by the disciplined execution of our strategies and our more diversified portfolio," said Chip Bergh, president and chief executive officer, in a press release.

"These results have outpaced the industry and exceeded even our own expectations, and as a result, we are raising our full-year revenue guidance," added Bergh, late Tuesday afternoon.

Levi Strauss net revenues grew 17 percent on a reported basis, driven by broad-based brand growth across its Levi's brand in all regions and channels. The Americas witnessed 11 percent growth, but clocked a 5 percent net income decline in the domestic market, on increased retail expansion and advertising costs, said the company.

Internationally, Levi's soared, particularly on the continent, as both Europe and Asia reported gains of 19 percent and 9 percent, respectively, excluding negative currency exchanges.

By category, Levi's direct-to-consumer revenues grew 19 percent on a solid sales performance and the expansion of its retail network, as well as e-commerce growth.

Total wholesale revenues grew 14 percent reflecting higher revenues in all regions.

Net income increased $59 million, "primarily reflecting gains on the company's hedging contracts in the second quarter of 2018, and a debt refinancing charge in the second quarter of 2017.

Adjusted EBIT grew 15 percent reflecting the revenue growth and higher gross margins, while operating income increased 22 percent to $77 million, said Levi's.

The Levi's brand collectively operated 53 more own stores at the end of the second quarter than it did a year prior.

Levi's outstanding quarterly performance does, however, come on the recent news that the EU is planning to levy a 25 percent tax on some American products, including men’s and women’s jeans, t-shirts, shorts and a host of sport equipment and apparel, in response to the newly introduced U.S. import duties.

Moreover, the EU measures could especially hurt textile manufacturers in California, a hub for denim production, and where Levi's in headquartered.

According to the U.S. Department of Commerce, last year the U.S. exported €583 million worth of apparel to the EU, down from the figure of €608 million in 2014.