Levi Strauss raises FY25 outlook amid strong Q2 performance
The Levi's brand itself experienced a 9% global increase on an organic basis.
In the earnings call, Michelle Gass, president and CEO of Levi Strauss & Co, highlighted the company "delivered another standout quarter exceeding expectations across sales, margins and EPS."
Gass attributed this success to "broad-based revenue growth across channels and categories" and "strong margin expansion," which she linked to the effective implementation of the company's strategic priorities.
Overview of Q2 FY25
In Q2, the most significant growth was observed in Europe, where net revenues soared by 14% on a reported basis.
In contrast, the Americas saw a more modest 5% increase in net revenues on a reported basis, while Asia's net revenues remained unchanged on both a reported and organic basis.
The company's net income from continuing operations surged to $80m from $17m in Q2 2024, which translate to diluted earnings per share (EPS) from continuing operations of $0.20 in Q2 FY25 against $0.04 during the same period last year.
The company's operating margin improved to 7.5% in Q2 FY25 from 1.5% in Q2 2024.
Gross margin saw an increase of 140 basis points to 62.6%, primarily due to reduced product costs and a more favourable channel mix.
Levi Strauss' selling, general and administrative (SG&A) expenses also rose to $791m in Q2 FY25 from $756m in Q2 2024. Adjusted SG&A expenses accounted for 54.4% as a percentage of sales, improving by 50 basis points over the previous year.
The company reported an 11% rise in direct-to-consumer (DTC) net revenues, with a comparable organic increase of 10%.
E-commerce net revenues also saw a 13% growth, both on a reported and organic basis. During the second quarter, DTC sales accounted for half of the total net revenues.
In April this year, Levi Strauss & Co expanded its DTC reach by introducing its Red Tab loyalty initiative to four more European markets.
Overview of H1 FY25
In the first half of the fiscal, Levi Strauss's revenue grew by 5%, reaching $2.97bn on a reported basis for the first half of the fiscal year.
Net income from continuing operations reached $220m compared to just $7m in H1 FY24, with diluted earnings per share from continuing operations increasing to $0.55 from $0.02.
Outlook
The 2025 guidance is based on ongoing operations and accounts for the Dockers brand being classified under discontinued operations.
The projections are made under the assumption that US tariffs on imports from China will persist at 30%, and tariffs for the rest of the world will maintain at 10% for the remainder of the year, said the company.
Levi Strauss raised its net revenue growth forecast by three percentage points: now expecting an increase of 1% to 2%, as opposed to an anticipated decline of 1% to 2%.
Gross margin expansion expectations have been adjusted slightly to an increase of 80 basis points due to a tariff impact of 20 basis points after mitigation strategies are applied.
Adjusted diluted EPS for the full year has been raised by $0.05: now projected at $1.25 to $1.30, up from the previous range of $1.20 to $1.25.
Commenting on the latest update, Chloe Collins, head of apparel at GlobalData said Levi Strauss "proved its resilience in Q2".
"The brand has been supported by the current popularity of Western fashion, as well as its partnership with Beyonce, with fans of the singer likely turning to the brand for outfits for her Cowboy Carter tour. This likely had a particular impact in Europe, which witnessed an impressive turnaround in Q2.
"The brand also saw improved consumer confidence in some markets [of Europe] as well as the rollout of its Red Tab loyalty program to markets such as Poland, Ireland and Denmark, strengthening its direct-to-consumer proposition.
"Asia showed the opposite trend, with sales down 0.8% in Q2 after growing 6.6% in Q1, which could be due to some anti-Americanism among consumers in countries that have been hit with high US tariffs, with Levi's particularly exposed to this drop in sentiment due to its strong US heritage.
"In its home region, the Americas, sales growth only softened slightly at 5.1% versus 6.4% in Q1, with many shoppers bringing purchases forward before tariff price rises hit down. The brand clearly anticipates a slowdown in the second half as this happens."
"Levi Strauss raises FY25 outlook amid strong Q2 performance" was originally created and published by Just Style, a GlobalData owned brand.
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