Levi Strauss & Co.
LEVI
reported stellar fourth-quarter fiscal 2021 results. Impressive gains from its e-commerce business and strategic efforts, including brand strength drove the quarterly performance. Buoyed by a robust finish to fiscal 2021, management issued an upbeat view for fiscal 2022.
We note that shares of this San Francisco, CA-based player increased more than 8% in after-hours trading on Jan 26. In the past month, this currently Zacks Rank #3 (Hold) stock has gained 4.6% against the
industry
’s 10.1% decline.
Q4 Metrics
LEVI’s adjusted earnings of 41 cents a share outpaced the Zacks Consensus Estimate by a penny. Moreover, quarterly earnings increased 105% from the year-ago quarter’s level and 58% from the fourth-quarter fiscal 2019 reading.
Net revenues of $1,684.8 million came above the Zacks Consensus Estimate of $1,683 million. Further, the metric jumped 22% on a reported basis and constant-currency basis. Revenues grew 7% on a reported and constant-currency basis from the fourth-quarter fiscal 2019 tally. About 3% revenue gains from Black Friday and the Beyond Yoga buyout were muted by the supply-chain impacts of $50 million.
Levi Strauss & Co. Price and EPS Surprise
Levi Strauss & Co. price-eps-surprise
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Levi Strauss & Co. Quote
Segment wise, net revenues in the Americas jumped 23% year over year to $885 million, while in Europe, the metric increased 16% to $453 million and that in Asia, grew 16% to $248 million. Revenues grew year over year, mainly due to the pandemic impacts on the prior-year results. LEVI’s newly-formed Other Brands segment, consisting of Dockers and Beyond Yoga, reported revenues of $99 million, increasing 60% year over year.
We note that the direct-to-consumer revenues rose 25% year over year. This was driven by LEVI-operated store net revenue increase of 28% and DTC e-commerce revenue surge of 22% from the respective year-ago quarter’s readings. As a rate of fourth-quarter revenues, sales from DTC stores and e-commerce accounted for 30% and 8%, respectively. LEVI’s global digital revenues inched up 2% year over year and represented 21% of the quarterly revenues. Global Wholesale revenues climbed 20% from the fourth-quarter fiscal 2020 figure on Levi’s brand strength.
Margins & Costs
Adjusted gross profit came in at $978.2 million, up 29.2% from the year-ago quarter’s level. Excluding the pandemic-related charges, adjusted gross margin of 58.1% expanded 350 basis points (bps) year over year.
Adjusted SG&A jumped 20.5% to $775.7 million due to elevated investments in advertising and promotion, increased selling expenses, investments in omni-channel, A.I. and digitization efforts. However, as a rate of revenues, adjusted SG&A contracted 50 bps to 46%.
Adjusted EBIT came in at $203 million, increasing significantly from $113 million reported in the year-earlier quarter. Also, adjusted EBIT margin was 12%, expanding 380 bps year over year on higher sales and gross margin.
Other Financials
Levi Strauss ended the quarter with cash and cash equivalents of $810 million and short-term investments of $92 million. These were complemented by an amount of $794 million available under its revolving credit facility, resulting in a total liquidity position of $1.7 billion.
As of Nov 28, 2021, long-term debt and total shareholders’ equity were $1,020.7 million and $1,665.7 million, respectively. Total inventories rose 9.8% to $898 million year over year. During fiscal 2021, cash from operations was $737 million. Further, adjusted free cash flow was $230 million during the same period.
During the fiscal fourth quarter, Levi Strauss repurchased 3.4 million shares for $88.4 million, with nearly $110 million remaining for future repurchases. It declared a cash dividend of 10 cents per share totaling roughly $40 million, payable Feb 24, 2022.
Outlook
Given Levi Strauss’s strength in business and growth strategies, management remains optimistic about fiscal 2022. For fiscal 2022, management projects a net revenue increase of 11-13% from the fiscal 2021 level in the band of $6.4-$6.5 billion. Adjusted EPS is guided between $1.50 and $1.56, up from $1.47 earned in fiscal 2021. The guidance assumes no major worsening of the pandemic, inflationary headwinds or closure of the global economies.
We note that the Zacks Consensus Estimate for fiscal 2022 sales and earnings is currently pegged at $6.39 billion and $1.51, respectively.
Key Picks in Retail
Some better-ranked stocks are
Zumiez
ZUMZ
,
Tapestry
TPR
and
Costco
COST
.
Zumiez, a global lifestyle retailer, currently flaunts a Zacks Rank #1 (Strong Buy). ZUMZ has a trailing four-quarter earnings surprise of 2,560%, on average. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
The Zacks Consensus Estimate for Zumiez’s fiscal 2022 sales suggests growth of 0.4% from the year-ago period’s reading.
Tapestry, the leading accessories’ designer, presently carries a Zacks Rank #2 (Buy). TPR has a trailing four-quarter earnings surprise of 29%, on average.
The Zacks Consensus Estimate for Tapestry’s fiscal 2022 sales and earnings per share (EPS) suggests growth of 14.8% and 18.2%, respectively, from the corresponding year-ago period’s levels. TPR has an expected EPS growth rate of 12.3% for three-five years.
Costco, a general merchandise retailer, has a Zacks Rank of 2 at present. COST has an expected EPS growth rate of 8.8% for three-five years.
The Zacks Consensus Estimate for Costco’s fiscal 2022 sales and EPS suggests growth of 10.9% and 14%, respectively, from the year-ago period’s corresponding figures. COST has a trailing four-quarter earnings surprise of 8.3%, on average.
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