Levi Strauss Earnings Top Estimates

As shoppers buy higher prices, it has paid off well for denim maker Levi Strauss.

The company topped estimates in its last quarterly report and reaffirmed a 2022 outlook, assuming no significant worsening of inflationary pressures or closures of global economies.

Levi Strauss reported fiscal first-quarter earnings and revenue that topped analysts’ estimates this week.

CEO Chip Bergh told CNBC that consumers have yet to trade down for less expensive apparel. He added that the retailer has yet to see consumers trade down for less expensive apparel, even as everything from gasoline prices to grocery bills surge.

According to Bergh, consumer demand has remained strong. To be sure, Bergh said Levi is keeping a close eye on consumer demand, knowing that projections of a looming recession have been growing among economists.

“We don’t have our head in the sand,” the CEO said. “If we see [demand] starting to get wobbly, we will take the appropriate action.”

For the three-month period ended Feb. 27, this is what the company reported compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

Earnings per share was 46 cents adjusted, compared to 42 cents expected. Revenue at $1.59 billion was higher than the $1.55 billion expected.

Net income of $196 million, or 48 cents a share, was compared to $143 million, or 35 cents a year from the period a year earlier. Excluding one-time items, it earned 46 cents a share, better than the 42 cents that analysts had been looking for.

Revenue rose 22% to $1.59 billion from $1.31 billion a year earlier, which also topped expectations for $1.55 billion.

Levi said it took a roughly $60 million hit to sales due to supply chain constraints during the latest period. The company’s global direct-to-consumer sales rose 35% from the prior-year period, and wholesale revenue was up 15%.

Direct-to-consumer represented 39% of total sales in the quarter, up from 38% in the previous period and 36% a year ago, the company said.

Sales climbed 26% in the Americas, rose 13% in Europe, and grew 11% in Asia on a year-over-year basis.

For fiscal 2022, the company calls for revenue to grow between 11% and 13% year over year. Analysts have projected an increase of 11.8%.

Levi expects annual per-share earnings ranging between $1.50 and $1.56, compared with analysts’ outlook of $1.54.

“The denim category is growing in a low-double-digit [rate] relative to where it was before pandemic,” Chief Financial Officer Harmit Singh told CNBC, saying “the world continues to become a lot more casual.”

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