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Levi Strauss & Co. (NYSE:LEVI) Delivers Impressive Q2 Results, Poised for Continued Growth
Published on September 24, 2024 | Ticker: LEVI

Levi Strauss & Co. (NYSE:LEVI), the iconic American denim brand, has reported its second-quarter fiscal 2024 results, showcasing impressive performance and a strong outlook for the remainder of the year. The company's strategic pivot towards becoming a direct-to-consumer (DTC) focused retailer is paying off, with the DTC channel delivering robust growth and improved profitability.

Financials

In the second quarter of fiscal 2024, Levi Strauss reported net revenues of $1.44 billion, up 7.8% year-over-year. This growth was driven by a 9% increase in constant currency, reflecting the company's ability to navigate the challenging macroeconomic environment. The company's annual revenue for fiscal 2023 stood at $6.18 billion.

The company's net income for the quarter was $18.0 million, compared to a net loss of $1.6 million in the prior-year period. For the full fiscal year 2023, Levi Strauss reported net income of $249.6 million. The company's operating cash flow for the quarter was $262.8 million, and for the full fiscal year 2023, it was $435.5 million. Free cash flow for the quarter was $222.6 million, and for the full fiscal year 2023, it was $120.0 million.

Geographical Performance

Geographically, the company's performance was mixed, with the Americas segment delivering strong growth, while Europe and Asia saw more muted results. In the Americas, net revenues increased 17.0% on a reported basis and 16.3% in constant currency, driven by robust performance in the DTC channel. Europe net revenues declined 2.1% on a reported basis and 1.7% in constant currency, as the region continued to navigate macroeconomic headwinds. Asia net revenues decreased 0.7% on a reported basis but increased 5.7% in constant currency.

Channel Performance

From a channel perspective, the company's DTC channel continued to be a standout, with net revenues increasing 8.2% on a reported basis and 10.5% in constant currency. This growth was driven by strong performance in both brick-and-mortar stores and e-commerce. The wholesale channel, on the other hand, saw a 7.4% increase on a reported basis and a 7.6% increase in constant currency, as the company's strategies to stabilize this business began to take hold.

Product Performance

Levi Strauss' product portfolio also demonstrated strong performance, with the Levi's brand continuing to gain momentum. The company's iconic 501 jeans saw a 16% increase in DTC net revenues, while the Denim Dressing category, which includes dresses, skirts, and jumpsuits, grew triple digits. The company's Western-inspired offerings, including its iconic Western shirts, also saw strong demand, with women's Western shirts up 40% in the quarter.

Outlook

Looking ahead, Levi Strauss provided an updated outlook for the full fiscal year 2024. The company now expects full-year reported net revenues to be at the midpoint of its previously guided range of 1% to 3% year-over-year growth, with constant currency revenue trending closer to the upper end of the range. Gross margin is expected to be up 180 basis points compared to the prior year, despite increased foreign exchange headwinds.

The company's focus on its DTC-first strategy and continued product innovation is expected to drive further growth and profitability improvements. Levi Strauss is also making strategic investments in its distribution and logistics network, which are expected to have a short-term impact on earnings but yield long-term benefits.

Conclusion

Overall, Levi Strauss' second-quarter performance demonstrates the strength of its brand, the success of its strategic initiatives, and its ability to navigate a challenging macroeconomic environment. The company's confidence in its ability to deliver accelerated growth and improved profitability in the second half of the fiscal year is a testament to its resilience and the effectiveness of its transformation efforts.

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