Levi Strauss (LEVI) earnings Q1 2024

Levi Strausswhich has long relied on wholesalers like Macy’s And Kohl’s to drive its business, now makes nearly half of its sales through its own website and stores, the company announced Wednesday when releasing its first-quarter financial results.

In the quarter ended Feb. 25, direct-to-consumer sales accounted for a record 48% of Levi’s overall sales, up from 42% a year ago and up 25% over two years, the retailer said. said.

This change is a boon for Levi’s profits. But it raises questions about the company’s relationships with its wholesale partners and whether it will hurt those retailers as they grapple with their own existential challenges.

Levi’s also beat Wall Street’s earnings and revenue estimates and raised its full-year forecast. Shares rose as much as 10% in extended trading.

Here are the jeans maker’s results in its fiscal first quarter compared to what Wall Street expected, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: 26 cents adjusted versus 21 cents expected
  • Income: $1.56 billion versus $1.55 billion expected

The company reported a net loss of $10.6 million, or 3 cents per share, in the quarter, compared with net income of $114.7 million, or 29 cents per share, for the period. last year. Excluding one-time costs related to Levi’s restructuring, the company reported earnings per share of 26 cents, above Wall Street estimates.

Sales fell to $1.56 billion, down about 8% from $1.69 billion a year earlier. The decline in sales was primarily attributed to a change in wholesale orders from Levi’s, which increased its profits by about $100 million in the year-ago period.

Levi’s still expects sales to rise 1% to 3% for the full year, due to a slowdown in discretionary spending and an uncertain economy. But she expects profits to be higher than she previously thought. The retailer now expects adjusted earnings per share to be between $1.17 and $1.27, compared to a previous range of $1.15 to $1.25.

Analysts expected full-year sales growth of 2.4% and earnings per share of $1.21, according to LSEG.

In recent years, Levi’s has moved away from wholesalers and increasingly makes its sales through its own stores and its website. Selling directly to consumers is better for Levi’s bottom line and gives it better data about its customers and their purchasing habits.

Perhaps more importantly, moving away from wholesalers also gives Levi’s greater control over its own destiny and reduces its exposure to department stores, which continue to shrink and face an uncertain future in the United States.

In late February, Macy’s – a key wholesale partner of Levi’s – announced the closure of 150 stores as activist investors from Arkhouse Management sought to buy the department store and take it private. The company invests primarily in real estate and appears to be more interested in monetizing the sprawling Macy’s store footprint than running a retail business.

In an interview with CNBC, CEO Michelle Gass — who took the helm at Levi’s about two months ago — said wholesale continues to be an important part of the company’s strategy. If Macy’s store closures or other problems at department stores affect Levi’s business, it expects direct-to-consumer sales to offset those losses.

“We work closely with our core customers because we are important to them, they are important to us and strategically wholesale is essential for us to amplify our reach to the consumer,” Gass said. “Even though there are pressures, these wholesale customers serve millions of consumers and so there are still many opportunities to gain market share within this channel.”

Levi’s has previously said it is working to make direct-to-consumer sales account for 55% of all sales, but if that number can increase, the company is “all in favor,” the executive said financier Harmit Singh.

Meanwhile, Gass said Levi’s is working “closely” with its key wholesale customers to ensure the brand presents itself in “the best way possible.”

During the quarter, global wholesale revenues decreased 9% year-over-year, after adjusting for changes in wholesale orders that occurred during the prior-year period.

This weakness is due to Europe, which Gass said had a “difficult” quarter.

“Looking ahead, we are optimistic. Our pre-bookings for the second half of the year in European wholesale are positive, based on the innovation and fashion we bring,” Gass said.

Levi’s is also transforming into a retailer that does more than just sell jeans. She is working to offer more skirts, dresses and tops and wants to be seen as a lifestyle denim company, not just a blue jeans company.

During the quarter, sales of items such as denim skirts, dresses and tops increased 19% in Levi’s direct-to-consumer channel, Gass said. The products also performed well in wholesale, she said.

Levi’s efforts come at a time when consumer spending on discretionary products like clothing and accessories is under pressure, with shoppers looking to use their extra dollars for things like eating out, traveling or paying off debt.

In late January, Levi’s announced it would cut 10% to 15% of its global workforce, which is expected to save the company about $100 million this fiscal year.


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