Levi Crushed Earnings Estimates And Raised 2021 Forecasts

Maybe casual Fridays are dominated by jeans and other denim products, but last Thursday was Levi Strauss & Co's day LEVI. Both sales and earnings for the fiscal second quarter topped the analysts' forecasts, as the demand for famous denim products is on the rise in China and the U.S.

The momentum from many consumers finally getting out more from their homes after the pandemic restrictions loosen, has driven the sales, both in stores and online, reflecting on Levi's fiscal Q2. The stock price has followed the good earnings news and jumped approximately 3% in extended trading on Thursday. Generally, the apparel market is close to recovery, and we witnessed good results from companies like The Buckle, Inc. BKE, Abercrombie & Fitch Co. ANF, Urban Outfitters, Inc. URBN, and L Brands, Inc. LB.

Fiscal Second Quarter Earnings

Levi's quarter which ended May 30th crushed both the Wall Street expectation and the results from the same quarter last year. The expected revenues were $1.21 billion, and the company managed to achieve $1.28 billion. That has driven the adjusted earnings per share, so instead of the expected 9 cents, the company made 23 cents. Comparing year-to-year results, the same quarter last year had a net loss of $364 million, or 91 cents loss per share. As that was the beginning of the pandemic, the sales hit rock bottom with only $498 million, and it was not possible to make a profit with such a low level of revenues.

Apparel Sales Rushing Back To Pre-Pandemic Levels

Apparel sales had taken a serious hit last year when the pandemic started, as many people started working and studying from home. With more people getting vaccinated, the restrictions are getting weaker, and apparel sales are rising back to the pre-pandemic levels. People are getting out of their homes more and more, and making plans for their holidays, so according to the Mastercard Spending Pulse report, apparel sales grew 62.9% as of June (year over year). E-commerce played a big role in this growth, and also will be the main driver of the apparel global market's future growth, which was valued at $1.9 trillion in 2019, and is expected to reach $3 trillion by 2030.

Levi's Outlook

As many shoppers stocked up with new jeans models (or sizes), the company was brave enough to announce that the fiscal third-quarter will finally get back to pre-pandemic levels. However, there are many factors out of the company's control, like the Delta variant of the coronavirus. Luckily, e-commerce is taking a bigger and bigger part in the company's revenues. The announcement from January 2021 is that the contribution of online sales has tripled compared to the pre-pandemic level, with the trend to double during 2021. That still does not mean we can forget the physical stores. They still hold the bulk of the business. And still, only 92% of stores are reopened at the moment.

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