Levi Strauss & Co. (NYSE:LEVI) hit the wires on Tuesday afternoon following the closing bell with the company’s Q1 report card. The company reported a clear beat, with earnings of $0.40 per share, $0.05 better than the S&P Capital IQ Consensus of $0.35 on revenues growth of 4.9% year/year to $1.51 bln (which was versus the $1.46 bln S&P Capital IQ Consensus). Note, this was a quarter that closed for the company in February, so it was largely not impacted by the COVID-19 outbreak in the US and EU, and did include 2019 Black Friday and holiday season sales.
Hence, it’s not exactly a tremendously powerful indicator of how this company is faring in the world as it is now. But we would note that the company made a special effort to point out that ecommerce was a primary driver for Q1 success.
In addition, the company’s comments on liquidity were probably the most disturbing point of contact between investors and management in the report: "We believe we will have adequate liquidity over the next 12 months to operate our business and to meet our cash requirements. As of February 23, 2020, we had cash and cash equivalents totaling approximately $873.6 million, short-term investments of $84.0 million and unused availability under the credit facility of $819.5 million, resulting in a total liquidity position of approximately $1.8 billion... We are also taking preemptive action to preserve our liquidity and manage our cash flow, such as reducing our discretionary spending, revisiting our investment strategies, suspending our share buyback program until further notice, and reducing payroll costs, including through employee furloughs and pay cuts... In April, 2020, as a precautionary measure to maximize our liquidity and to increase our available cash on hand, we drew down $300 million on our senior secured revolving credit facility. The proceeds will be available to be used for working capital, general corporate or other purposes."
However, the stock has been cut in half since February, so the lack of a bearish response can be counted in the “baked in” category.
Levi Strauss & Co. (NYSE:LEVI) operates as an apparel company. It designs, markets, and sells jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear, and related accessories for men, women, and children in the Americas, Europe, and Asia.
The company sells its products under the Levi's, Dockers, Signature by Levi Strauss & Co., and Denizen brands; and also licenses its Levi's and Dockers trademarks for various product categories, including footwear, belts, wallets and bags, outerwear, sweaters, dress shirts, kids wear, sleepwear, and hosiery.
The company sells its products through third-party retailers, such as department stores, specialty retailers, third-party e-commerce sites, and franchisees who operate brand-dedicated stores; and directly to consumers through various formats, including company-operated mainline and outlet stores, company-operated e-commerce sites, and select shop-in-shops located in department stores and other third-party retail locations.
It operates approximately 3,000 retail stores and shop-in-shops.
Our LEVI Guidance Summary:
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Levi Strauss beats by $0.05, beats on revs (11.97 +1.03)
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Reports Q1 (Feb) earnings of $0.40 per share, $0.05 better than the S&P Capital IQ Consensus of $0.35; revenues rose 4.9% year/year to $1.51 bln vs the $1.46 bln S&P Capital IQ Consensus.
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The increase in revenue was primarily driven by an increase in DTC net revenues; as the benefit of a Black Friday week was included in the first quarter of 2020, and expansion and performance of the retail network and e-commerce, drove further growth.
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Adjusted EBIT margin was 12.6%, 180 basis points lower than the first quarter of 2019 on a reported basis, and 170 basis points lower than the first quarter of 2019 on a constant-currency basis.
Our LEVI Research Notes:
Liquidity Outlook: "We believe we will have adequate liquidity over the next 12 months to operate our business and to meet our cash requirements. As of February 23, 2020, we had cash and cash equivalents totaling approximately $873.6 million, short-term investments of $84.0 million and unused availability under the credit facility of $819.5 million, resulting in a total liquidity position of approximately $1.8 billion... We are also taking preemptive action to preserve our liquidity and manage our cash flow, such as reducing our discretionary spending, revisiting our investment strategies, suspending our share buyback program until further notice, and reducing payroll costs, including through employee furloughs and pay cuts... In April, 2020, as a precautionary measure to maximize our liquidity and to increase our available cash on hand, we drew down $300 million on our senior secured revolving credit facility. The proceeds will be available to be used for working capital, general corporate or other purposes."
