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Levi’s Gains Momentum Worldwide; Raises Full-Year Guidance

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Levi Strauss & Co.’s (LS&Co.) first quarter financial results help shut down the debate about denim’s popularity.

In a Nutshell: While the company has been busy digitizing its finishing process and taking Kenzo to court, it has also been racking up sales, driven largely by Levi’s brand growth across all regions and retail channels. The company raised its full-year guidance to 6 percent to 8 percent.

Sales: Net revenues increased 22 percent on a reported basis, and 16 percent excluding $55 million in favorable currency translation effects, driven by broad-based Levi’s brand growth in all regions and channels. LS&Co.’s net revenues increased 13 percent in the Americas. The Increase was seen across wholesale and direct-to-consumer channels in all markets. The company had a particularly strong holiday season in the U.S.

In Europe, net revenues grew 30 percent, with the strongest growth in women’s and tops. In Asia, net revenues increased 5 percent, thanks in part to an expanded direct-to-consumer business.

On a reported basis, direct -to-consumer revenues grew 24 percent on performance and expansion of the retail network, as well as e-commerce growth, the company reported. Meanwhile, wholesale reported revenues increased 21 percent, driven by higher revenues from Europe and the Americas.

Earnings: Net income declined $79 million due to a $136 million provisional non-cash tax charge as a result of the enactment of the 2017 Tax Cuts and Jobs Act. Excluding this non-cash charge, adjusted net income was $117 million, nearly double last year’s $60 million.

On a reported basis, gross margin for Q1 was 54.9% of revenues compared with 51.2% in the same quarter of fiscal 2017. The margin benefit stems from revenue growth in the direct-to-consumer channel and international business, lower product sourcing costs and a favorable transactional impact of currency.

CEO’s Take: “The momentum and growth trends we saw in the back half of the year not only continued but accelerated in the first quarter,” Chip Bergh, LS&Co. president and CEO, said. “Our results clearly demonstrate that our strategies are working and that the incremental investments we are making in marketing, direct-to-consumer expansion and our more diversified portfolio are paying off.”

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