Daily Management Review

Retail Footprint To Be Expanded By Levi Strauss, Reports Estimate Beating Revenues


Retail Footprint To Be Expanded By Levi Strauss, Reports Estimate Beating Revenues
While announcing its plans for expansion of its retail footprint, Levi Strauss & Co also forecast a lower than expected drop in revenues in the current quarter after it saw a surge in its online which helped the denim maker to report a surprise profit.
The news of the better than expected results pushed the shares of the company by 10 per cent in extended trading on Tuesday. The company also said that it would sell its Red Tab jeans collection at the 500 Target Corp stores, compared to the current number of 140, by the fall of 2021.
The company’s products were also launched at some Dick’s Sporting Goods stores.
Many analysts had been expecting the apparel maker’s business to be hit to a greater extent than it actually took, because of the closures of its stores and several departmental stores worldwide because of the novel coronavirus pandemic. But now Levi plans to launch new stores and make new investments in its online business which offers a high margin. In the company’s third quarter, online sale of the company grew by 52 per cent.
“While growth in our direct consumer business will outpace that of our wholesale channel, we continue to see opportunities to reach new consumers with new and expanded wholesale distribution,” Chief Executive Chip Bergh said on an earnings call.
Diversification into tops and women’s clothing also proved beneficial for the company as it experienced strong demand for its blouses, shorts and jeans which accounted for a major proportion of the growth in its online sales.
While analysts had expected the company to announce a drop of 19.62 per cent drop in the company’s fourth quarter revenues, Levi forecast a drop of between 14 per cent and 15 per cent. The company also forecast profit per share in line with estimates of analysts which was between 14 cents and 16 cents.
For the quarter ended August 23, the company also reported a gross margin of 54.3 per cent which was higher than the 53 per cent it reported in the same period last year. This was boosted by price increases and strength in its direct-to-consumer channel.
Excluding items, San Francisco, California-based Levi earned 8 cents per share, versus estimates for a loss of 22 cents. According to IBES data from Refinitiv, analysts estimated net revenues of the company for the period to come in at $822.3 million but the company reported higher net revenue at $1.06 billion which was a drop of about 27 per cent.