Levi Strauss & Co. reports first-quarter 2021 financial results

Levi Strauss & Co[LEVI] today announced financial results for the first quarter ended February 28, 2021. Due to the company’s fiscal quarter end, the impacts of the pandemic were not material to the company's results of operations for the first quarter of 2020.

First-Quarter Total Company Overview

Net revenues declined 13 percent on a reported basis, and 16 percent on a constant-currency basis. The decrease was primarily due to the impacts of the COVID-19 pandemic, including reduced traffic and ongoing closures of company-operated and third-party retail locations for portions of the quarter and in certain markets. Wholesale net revenues declined 4 percent, a significant sequential improvement from the fourth quarter of fiscal 2020, reflecting strong performance in the company’s global digital business. Direct-to-consumer net revenues declined 26 percent; the decline in first quarter direct-to-consumer net revenues was driven by lower traffic to brick-and-mortar stores due to the pandemic, particularly in tourist locations, which comprise a substantial portion of the company’s brick and mortar network. The brick and mortar decline was partially offset by 25 percent growth in company operated e-commerce business, including the benefit of accelerating omni-channel initiatives. Direct-to-consumer stores and e-commerce comprised 26 percent and ten percent, respectively, of total company reported net revenues in the first quarter. The lack of a Black Friday in the current year adversely impacted the year-over-year direct-to-consumer net revenues growth comparison by about five percentage points, and total company net revenues comparison by three percentage points.

Gross profit was $760 million, as compared to $839 million in the same quarter in the prior year. Gross margin was 58.2 percent of net revenues, up from 55.7 percent in the same quarter of the prior year. The increase in gross margin was primarily due to favorable product mix, price increases, lower promotions and $7.2 million reduction in estimated COVID-19 related inventory charges, largely for adverse fabric purchase commitments, partially offset by a lower proportion of sales in the company's direct-to-consumer channel, which has higher margins.

Adjusted gross margin, which excludes the COVID-19 related charges, was 57.7 percent, an increase of 200 basis points compared to prior year, primarily due to favorable product mix, price increases and lower promotions, partially offset by a lower proportion of sales in the company's direct-to-consumer channel, which has higher margins. Favorable currency exchange rates benefited year-over-year comparisons by approximately 70 basis-points.

SG&A expenses were $583 million, a 12 percent decline compared to $661 million in the same quarter in the prior year, reflecting the company’s cost-savings actions, net of continuing to invest in its omni-channel, A.I. and digitization initiatives.

Operating income of $177 million declined 1% as compared to $179 million in the same quarter in the prior year, as lower net revenues as a result of the continued adverse impact of COVID-19 were offset by higher gross margins and lower SG&A expenses reflecting the company’s cost-reduction initiatives.

Net income was $143 million as compared to net income of $153 million in the same quarter of the prior year, due to higher interest expense.

Adjusted EBIT of $174 million declined eight percent as compared to $189 million in the same quarter of the prior year. First quarter Adjusted EBIT margin was 13 percent, despite the adverse revenue impact of COVID-19, due to the company’s higher gross margin and cost-reduction initiatives.

Adjusted net income was $140 million as compared to Adjusted net income of $162 million in the same quarter of the prior year, due to the decline in Adjusted EBIT and higher interest expense.

Adjusted diluted earnings per share declined to $0.34 compared to $0.40 for the same prior-year period in-line with the Adjusted net income decline.

Additional information regarding Adjusted gross margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted net income, and Adjusted diluted earnings per share, as well as amounts presented on a constant-currency basis, all of which are non-GAAP financial measures, is provided at the end of this press release.

Source: BUSINESS WIRE