Levi Strauss posts net revenue growth of 22 percent in Q1
By Prachi Singh
11 Apr 2018
Levi Strauss & Co. reported first quarter net revenues grew 22 percent on a reported basis and 16 percent excluding 55 million dollars in favorable currency translation effects, driven by broad-based Levi's brand growth in all regions and channels. The company also raised full-year 2018 revenue growth guidance to 6 to 8 percent range in constant currency.
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"The momentum and growth trends we saw in the back half of last year not only continued but accelerated in the first quarter," said Chip Bergh, President and CEO, Levi Strauss & Co. in a media release, adding, "Our results clearly demonstrate that our strategies are working and that the incremental investments we are making in marketing, direct-to-consumer expansion and our more diversified portfolio are paying off."
Highlights of Levi Strauss’s Q1 results
On a reported basis, direct-to-consumer revenues grew 24 percent on performance and expansion of the retail network, as well as ecommerce growth. The company had 56 more company-operated stores at the end of the first quarter 2018 than it did a year prior. Wholesale reported revenues, the company said, grew 21 percent primarily reflecting higher revenues from Europe and the Americas.
Net income declined 79 million dollars due to a 136 million dollars provisional non-cash tax charge as a result of the enactment of the 2017 Tax Cuts and Jobs Act. Excluding this non-cash charge, adjusted net income was 117 million dollars, nearly double over last year's 60 million dollars. Adjusted EBIT grew 59 percent reflecting higher gross margins and the revenue growth. On a reported basis, gross margin for the first quarter was 54.9 percent of revenues compared with 51.2 percent in the same quarter of fiscal 2017.
Operating income of 174 million dollars was up 61 percent for the first quarter compared to the same quarter of fiscal 2017, and operating margin increased to 13 percent, primarily reflecting the revenue growth and higher gross margins, partially offset by higher SG&A.
Overview of Levi Strauss’s regional performance
In the Americas, excluding favourable currency effects of 6 million dollars, net revenues grew 13 percent reflecting higher revenues across wholesale and direct-to-consumer channels in all markets in an improving retail environment, including a particularly strong holiday season in the United States. In Europe, excluding favourable currency effects of 39 million dollars, net revenues grew 30 percent reflecting broad-based growth across all markets, channels, and product categories, with the strongest growth in women's and tops.
In Asia, excluding favourable currency effects of 10 million dollars, net revenues grew 5 percent reflecting direct-to-consumer expansion and performance. The increase in operating income in all three regions, the company added, reflects higher net revenues and gross margins, partially offset by higher direct-to-consumer and advertising investments.