Levi Strauss (NYSE: $LEVI), the denim giant, released its third quarter of fiscal 2024 results on Wednesday after markets closed. It posted mixed results for the quarter, which sent the stock falling. Below are the details of the third quarter results.
Levi Strauss Posts Mixed Q3 Results
The denim maker posted revenue of $1.52 billion, up from $1.51 billion the previous year but below estimates of $1.55 billion. Its adjusted earnings per share came in at $0.33, above the previous year’s $0.28 and above estimates of $0.31.
Its third-quarter gross margin rose 440 basis points to 60%, while the adjusted operating margin fell to 2% compared to 2.3% the previous year. Adjusted SG&A increased 4.8% year over year to $735 million, while the adjusted EBIT margin rose 250 basis points to 11.6%, driven by the increase in gross margin.
Its direct-to-consumer revenue grew 10% year over year, driven by 16% growth in e-commerce and 12% growth in the US. Overall, the direct-to-consume segment accounts for 44% of total revenue.
Balance Sheet And Share Buyback
Levi Strauss ended the quarter with $577 million in cash and cash equivalents, while total liquidity was reported at $1.3 billion. The denim maker reported that total inventories fell 7%.
Meanwhile, it paid out a dividend of $0.13 per share for a total of $52 million, and bought back $18 million worth of shares. In total, Levi Strauss returned $69 million to its shareholders, representing a 45% year over year increase in shareholder returns. It ended the quarter with $621 million under its share repurchase program, which has no deadline.
Levi Strauss Trims Revenue Guidance
For fiscal 2024, Levi Strauss now expects revenue to grow 1% from the previous guidance of 1% to 3%, and below analysts’ expectations of 2.3% growth. It reaffirmed its adjusted EPS guidance of $1.17 to $1.27, which is in line with forecasts of $1.25 at the midpoint.
Levi Strauss To Exit Dockers
Levi Strauss, which owns the popular Levi’s rand, Dockers, and Beyond Yoga, has not enjoyed much success with its Dockers brand. Consequently, the company is looking to exit the brand. Sales for Dockers fell 15% in the third quarter to $73.7 million, while its Beyond Yoga brand saw sales rise 19% YoY to $32.2 million.
During the earnings call, Levi’s CFO Harmit Singh stated that they were narrowing their focus to “Levi’s and Beyond Yoga, which will drive higher growth and margins.” As for Dockers, the company indicated in the third quarter results that it could consider “a potential sale or other strategic transaction.”
Levi Strauss Stock Performance
Following the mixed third quarter results, Levi Strauss fell 22.49% during pre-market trading to $18.64 per share. Levi Strauss has had a great run as of Wednesday’s closing price, rising 27.33% years to date, compared to the 19.68% gain of the S&P 500 in the same period.
Over the past 12 months, Levi’s (LEVI) is up 55.65%, beating the S&P 500’s gain of 33.12%. Additionally, while the S&P 500 has only experienced a gain of 1.1% over the past month, Levi’s (LEVI) has experienced growth of 9.3%.
Analysts remain optimistic about the future of LEVI stock, giving it a strong buy rating. They forecast a wide range of price targets in the next 12 months, with a high of $28, and a low of $21. Their average price target of $25, is an 18.71% upside based on Wednesday’s closing price of $21.06.
Is Levi Strauss (LEVI) A Great Investment In 2024?
While Levi Strauss missed estimates in Q3, it reported strength in its direct-to-consumer business, which management expects to account for 55% of total revenue in the future. Additionally, Levi Strauss has benefited from a giant moat for its brand. Being one of the best-known denim wear brands worldwide, Levi’s can rely on that to sustain growth. Coupled with its other initiatives, such as its collaboration with Beyonce, Levi’s long-term future looks promising.
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