Levi Strauss Surges on Upbeat 1st-Half Guidance
- By James Li
Shares of Levi Strauss & Co. (NYSE:LEVI) climbed more than 3% in aftermarket trading on Thursday on the back of raising its first-half revenue and earnings guidance despite recording sales decline during the first quarter.
For the quarter ended Feb. 28, the San Francisco-based denim jean producer reported net income of $143 million, or 35 cents in diluted earnings per share, compared with net income of $153 million, or 37 cents in diluted earnings per share, in the prior-year quarter. Despite this, adjusted net earnings of 34 cents per share topped the Refinitiv estimate of 25 cents per share while revenue of $1.306 billion topped the consensus estimate of $1.25 billion.
Company reports sales setback as coronavirus lockdowns hamper brick-and-mortar operations
Net sales for the quarter declined 13% from first-quarter 2020 sales of $1.506 billion, driven by lower foot traffic stemmed from coronavirus pandemic-infused closures of company-operated and third-party retail locations. Levi Strauss added that direct-to-consumer sales declined 26% year over year, reflecting lower brick-and-mortar operations, especially in tourist areas: Over 33% of the company's stores in the Europe were shut down due to lockdown regulations.
Levi Strauss CEO Chip Bergh said that despite the sales setback, the company continued leaning into its strategies of diversifying its businesses while operating prudently to manage the ongoing uncertainty. Chief Financial Officer Harmit Singh added that the company's first-quarter results increased management's confidence of achieving adjusted Ebitda margin targets when sales return to pre-pandemic levels.
For the first half of 2021, Levi Strauss raised its net sales guidance to a growth between 24% and 25% compared to sales from the first half of 2020 and its net adjusted earnings estimate to between 41 cents and 42 cents. The guidance implies adjusted earnings of between 7 and 8 cents for the second quarter, topping the consensus estimate of 5 cents.
Stock price surges in post-market trading
Shares of Levi Strauss traded around $25.93 in post-market trading, adding 3.64% to its 2.29% gain for Thursday.
GuruFocus ranks the company's financial strength 4 out of 10: While the company's Altman Z-score of 2.69 indicates marginal financial distress, interest coverage and debt ratios are underperforming over 80% of global competitors.
Gurus with holdings in Levi Strauss include Chuck Royce (Trades, Portfolio)'s Royce Investment Partners, Paul Tudor Jones (Trades, Portfolio)' Tudor Investment, Jeremy Grantham (Trades, Portfolio)'s GMO and Robert Olstein (Trades, Portfolio)'s Olstein Capital Management.
Disclosure: No positions.
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This article first appeared on GuruFocus.
