Levi Strauss & Co. Q3 Fiscal 2024 Earnings Call Highlights

Levi Strauss & Co. (NYSE: LEVI) reported strong third-quarter fiscal 2024 results, showing a 2% increase in net revenues (3% growth excluding Denizen exit) and 5% global growth for the Levi’s brand, their best quarterly performance in two years. The company also noted record gross margins of 60% and a significant improvement in adjusted EBIT margin.

Key Takeaways

• Net Revenues: Increased by 2% in constant currency terms, 3% after adjusting for Denizen exit.
• Levi’s Brand Growth: Experienced 5% global growth, particularly strong in the women’s segment and direct-to-consumer channels.
• Gross Margins: Achieved a record 60%, with a 250 basis point expansion in adjusted EBIT margin.
• EPS Growth: Adjusted diluted EPS showed double-digit growth.
• Market Challenges: Facing difficulties in Dockers, China, and Mexico markets, with strategic evaluations ongoing.
• New Partnership: Launched a global campaign with Beyoncé running through 2025.
• Direct-to-Consumer Growth: Grew 12%, with e-commerce up 18%.
• International Performance: Business grew 5%, with Europe returning to growth at 7%.
• Beyond Yoga: Saw a 19% increase, reflecting a successful strategic plan.
• Project Fuel Savings: Anticipated $50 million savings contributing to lower SG&A as a revenue percentage.

Company Outlook

• Q4 revenue growth is expected to be in the mid-single digits.
• Full-year adjusted EPS projected between $1.17 and $1.27.
• Plans to open 100 new doors and achieve long-term operating margins of 15%.

Market Performance

Bearish Factors

• Struggles in Dockers, China, and Mexico markets.
• Mixed results in Mexico, especially in wholesale.
• Previous revenue miss attributed to foreign exchange and wholesale challenges in Mexico.

Bullish Factors

• Strong quarterly performance noted for the Levi’s brand.
• Women’s business gained 11%, maintaining the leading U.S. position.
• Robust performance in both retail and e-commerce segments.
• European wholesale returned to growth at 4%, with double-digit growth in DTC.
• Improvement in Beyond Yoga business linked to strategic planning.

Conclusion

Levi Strauss & Co. is aligning itself for stronger performance moving forward, with a focus on enhancing revenue growth and profitability. The company is narrowing its focus on the Levi’s brand and Beyond Yoga while exploring strategic alternatives for the underperforming Dockers brand. Leveraging strengths in product innovation and strategic partnerships will be critical to their continued success.