Levi's: EPS better, but market crucifies falling margin

(CercleFinance.com) - Levi's reported better-than-expected quarterly results on Thursday, boosted by its direct-to-consumer business, although falling margins reflect the continuing impact of inflation.


The company's adjusted gross margin fell to 55.8% in the three months to end-February from an all-time high of 59.4% a year earlier, while its adjusted operating margin fell by 14.9% to 11%.

SG and A costs rose to $785m over the quarter, from $709m a year earlier, in part due to advertising spending to celebrate the 150th anniversary of its flagship 501 jeans.

At $1.7bn, sales rose by 6% on a reported basis and by 9% at constant exchange rates, driven by growth in direct-to-consumer (DTC) sales, which rose by 12% on a reported basis and by 16% at constant exchange rates.

Net profit fell to $115m, or 29 cents per share, from $196m (48 cents) a year earlier.

Excluding exceptional items, the group's profit was 34 cents per share, while analysts were expecting an average adjusted profit of 32 cents per share.

For its current financial year, the San Francisco-based company still expects sales to increase by 1.5% to 3%, i.e. between 6.3 and 6.4 billion dollars, for an adjusted EPS of between 1.30 and 1.40 dollars.

Following this publication, the stock fell by over 11% in early trading in New York on Thursday morning.


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