Levi Strauss & Co. : Reports First-quarter 2020 Earnings

Highlights:

First-Quarter Reported Revenues of $1.5 Billion, Up 5%; Constant-Currency Revenues Up 6%

First-Quarter Diluted EPS was $0.37; Adjusted Diluted EPS was $0.40

Cash at Quarter End of $0.9 Billion and Total Available Liquidity of $1.8 Billion

Announces Second Quarter Dividend of $0.08 per Share

Due to Uncertainty Related to COVID-19, Company Withdraws Prior Annual Guidance

SAN FRANCISCO-Levi Strauss & Co. (NYSE: LEVI) today announced financial results for the first quarter ended February 23, 2020. Due to the timing of the company's fiscal year end, the company's first fiscal quarter of 2020 included the benefit of the calendar 2019 Black Friday week. However, the mid-quarter outbreak of COVID-19 adversely impacted the company's first quarter net revenues in Asia by an estimated $20 million.

'Our first quarter results underscore the strength of the Levi's brand and the efficacy of our strategies to diversify our business, both of which will be crucial to coming out of the current crisis stronger than ever'

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First-Quarter 2020 Highlights

Net revenues growth of five percent on a reported basis, six percent in constant-currency; Black Friday benefited the year-over-year net revenues growth comparison by about three percentage points on both a reported and constant-currency basis; adverse impact of COVID-19 and the continuing unrest in Hong Kong was estimated to be approximately two percentage points

Gross margin increased 110 basis points on a reported basis to 55.7 percent, the company's highest quarterly gross margin in its recent history, reflecting the benefit of price increases, direct-to-consumer and international sales growth, and a reduction in sales to the off-price channel; currency impact to the gross margin comparison was insignificant

Net income up four percent, and Adjusted net income up eight percent, primarily due to lower income tax rate, offset in part by the timing of advertising and other administrative costs

Adjusted EBIT decreased eight percent on a reported basis and seven percent in constant-currency; adverse impact of COVID-19 was approximately $10 million; Adjusted EBIT margin of approximately 13 percent declined compared to the first quarter of 2019 on both reported and constant-currency bases, reflecting an expected shift in the timing of advertising and other administrative costs, as well as an adverse impact of COVID-19, partially offset by the benefit of Black Friday

Adjusted diluted EPS rose 2 cents to $0.40, despite adverse impacts of COVID-19 of $0.02, higher share count of $0.01, and unfavorable currency effects of $0.01

Total inventories down seven percent compared to a year prior reflecting inventory efficiency

'Our first quarter results underscore the strength of the Levi's brand and the efficacy of our strategies to diversify our business, both of which will be crucial to coming out of the current crisis stronger than ever,' said Chip Bergh, president and chief executive officer of Levi Strauss & Co. 'As this human and economic tragedy unfolds globally over the coming months, we are taking swift and decisive action that will ensure we remain a winner in our industry. The Levi's brand has never been stronger, our balance sheet is solid and we have an experienced leadership team that is not afraid to take action that will help us not only weather this crisis, but transform our business for the better. This company has endured for 167 years and successfully made it through everything from two world wars, the Great Depression, earthquakes, fires and the 1918 Flu Pandemic, all while remaining true to our values. I believe the true character of a company is shown in a time of crisis, and as we have in the past, we will navigate this one by leveraging our strengths and seizing opportunities that will help us continue to thrive over the long-term.'

'Significant gross margin expansion, lower inventory and higher earnings all contributed to strong financial performance in the first quarter of 2020,' said Harmit Singh, executive vice president and chief financial officer of Levi Strauss & Co. 'In the short term we are reducing costs and capital spend while managing inventory and gross margins. We've built a healthy balance sheet that provides us significant liquidity to both weather the storm in the near term and emerge from this stronger, with our long-term growth algorithm intact.'

COVID-19 Update

In the first quarter of 2020, prior to COVID-19 leading to store closures in mid-January, the company's net revenues growth in mainland China was double digits. At the end of the quarter, nearly all company-operated owned and franchisee doors in mainland China were closed. Currently, all company-operated doors and all but six franchisee doors have reopened in mainland China, including the company's beacon store in Wuhan. Additionally, the company is in the process of converting stores in Guangzhou and Chengdu from franchise to company-operated. While traffic and sales remain down to prior year, weekly sales performance is sequentially improving, with digital sales in the market trending towards year-over-year growth.

Since mid-March, in response to the pandemic, the company has temporarily closed all its doors, both company-operated and franchise, in the Americas and Europe, as well as most doors in Asia outside greater China, Korea and Japan. Accordingly, the adverse impact to the company's second-quarter net revenues, earnings and cash flows is expected to be materially significant.

First-Quarter Total Company Overview

https://www.levistrauss.com/wp-content/uploads/2020/04/Exhibit-99.1-1Q-2020-Press-Release-FINAL-V3.pdf

Contacts

Investor Contact:

Aida Orphan

Levi Strauss & Co.

[phone]

[e-mail]

Media Contact:

Kelly Mason

[phone]

[e-mail]

(C) 2020 Electronic News Publishing, source ENP Newswire