Levi Strauss Crushes Earnings Estimates and Raises 2021 Forecast

Denim maker Levi Strauss reported its second quarter financial results this week, crushing estimates and raising its 2021 forecast citing strong denim sales.

Thanks to strong consumer demand for its denim in the U.S. and China, the company had topped analysts forecasts.

Levi’s latest sales were down 3% on a two-year basis, but says it expects fiscal third-quarter sales to finally exceed pre-pandemic figures. This was previously expected to happen in the furth quarter.

The company has said that customers are stocking up on jeans in new sizes and styles in the U.S. and China as they emerge from their homes during the pandemic.

Levi’s stock jumped around 3% in extended trading on Thursday.

“There are a lot of things that are outside of our control, like the pandemic … and the Delta variant, and what’s going to happen next,” said Chief Executive Chip Bergh in a phone interview with CNBC. “But the team has demonstrated a lot of agility and being able to respond.”

For the second quarter ended May 30th, Levi’s reported EPS of 23 cents a share compared to 9 cents expected. Revenue at $1.28 billion was better than the $1.21 billion that was expected.

The company reported a profit of $65 million, or 16 cents per share, from a net loss of $364 million, or 91 cents per share, a year earlier. Excluding one-time adjustments, Levi earned 23 cents per share, topping analysts’ estimates for 9 cents.

Levi’s revenue exploded 156% to $1.28 billion from $498 million a year earlier.

Sales in the U.S. and China also were higher than 2019 levels, but were still down on a two-year basis in Europe as stores remained closed due to coronavirus. About a third of Levi’s European stores, and 17% of its global locations, were closed during the period.

The company said 92% of its stores are reopened at the moment.

“We are seeing good evidence of the new denim cycle driven by the looser and baggier fits, which we’ve led, and that gives us a lot of optimism about the second half of this year,” Bergh told CNBC.

Global e-commerce sales were up 75% year over year, representing about 23% of total sales.

Looking ahead, for fiscal 2021, Levi expects earnings of between $1.29 and $1.33 per share after adjustments. Analysts had been looking for earnings of $1.15 per share.

For the second half of the year, Levi expects sales to rise 28% to 29% compared with a year earlier, and be up 4% to 5% compared with 2019.

“Revenues in most markets are recovering faster than anticipated, and we are emerging from the pandemic with sustainable and improved structural economics,” Chief Financial Officer Harmit Singh remarked.

The company also raised its dividend by 2 cents per share to 8 cents for the third quarter.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.