San Francisco, CA – Levi’s, the iconic American denim company, reported better-than-expected earnings in its latest financial quarter, driven by a combination of increased direct-to-consumer sales and cost-cutting measures. The company marked its first dividend increase in six quarters, raising it by 8% to 13 cents per share.
Despite the positive financial results, Levi’s stock experienced a 12% drop in after-hours trading following the earnings report. The company’s performance during the quarter exceeded Wall Street expectations, with adjusted earnings per share coming in at 16 cents compared to the anticipated 11 cents. However, revenue slightly missed estimates, totaling $1.44 billion versus the expected $1.45 billion.
Net income for the three-month period ending May 26 reached $18 million, or 4 cents per share, a significant improvement from the prior year’s loss of $1.6 million, or zero cents per share. Excluding one-time items, Levi’s reported earnings of $66 million, or 16 cents per share. Sales for the quarter rose by 8% to $1.44 billion, up from $1.34 billion in the previous year.
The company attributed the disappointing sales performance to unfavorable foreign exchange conditions and weak sales at its Docker’s brand. Levi’s CFO, Harmit Singh, acknowledged challenges faced by the khaki and chinos brand, as sales for Docker’s reached $82.4 million, an 8.6% increase from the same period the year before.
Despite the strong earnings beat, Levi’s maintained its full-year guidance, projecting earnings per share between $1.17 and $1.27. The company emphasized its transition to a more third-party reliant distribution and logistics network in the United States and Europe, aiming to better cater to the increasing demand from direct-to-consumer sales channels.
CEO Michelle Gass expressed optimism regarding Levi’s strategic shift towards a direct-to-consumer-first approach, noting the positive impact it has had on both sales and profitability. With nearly half of its sales now stemming from its own website and stores, Levi’s continues to focus on enhancing its direct sales channels for sustained growth.
By expanding its direct sales channels, Levi’s aims to reduce reliance on traditional wholesalers and gain better consumer insights. While this shift may lead to higher profits, it also brings new challenges, such as increased operational costs and complexities associated with managing returns and logistics under a direct model.
The company’s financial performance underscores the evolving retail landscape, where direct-to-consumer sales are becoming increasingly vital for brands to navigate changing consumer preferences and market dynamics. Levi’s strategic approach reflects a broader industry trend as companies seek to establish stronger connections with customers through owned sales channels.