Levi Strauss & Co (LEVI) Q2 2024 earnings summary

Executive summary

• Q2 2024 net revenues rose 8% year-over-year (9% in constant currency) to $1.44 billion, driven by DTC and wholesale recovery, with sequential improvement across the business.

• Global DTC revenue up 8% (11% in constant currency), marking nine consecutive quarters of robust comp growth; e-commerce up 19%.

• Record gross margin of 60.5%, up 180 bps from prior year, driven by lower product costs and favorable mix.

• Adjusted diluted EPS was $0.16, up from $0.04 prior year, exceeding expectations.

• Strategic focus on DTC-first, omni-channel retailing and Project Fuel restructuring is driving results.

Financial highlights

• Q2 net revenues were $1.44 billion, with DTC and franchise business comprising up to 54% of total net revenues.

• Gross margin reached a record 60.5%, up 180 basis points year-over-year.

• Adjusted EBIT margin increased to 6.0%, with adjusted EBIT at $87 million, up 176% year-over-year.

• Adjusted SG&A was $785 million, 54.4% of sales, down 190 bps due to cost controls.

• Inventory dollars down 19% year-over-year; cash and equivalents at $641 million, total liquidity ~$1.4 billion.

• Positive free cash flow of $223 million in Q2 and $437 million year to date.

• Shareholder returns up 36% with share buybacks and dividends; quarterly dividend increased by 8% to $0.13.

Outlook and guidance

• Full-year reported revenues expected to grow 1–3% year-over-year, with constant currency revenue trending to the upper end.

• Full-year gross margin expected up 180 basis points, 30 basis points higher than prior guidance.

• Adjusted diluted EPS guidance maintained at $1.17–$1.27 for the year, including a $0.05 adverse impact from logistics, marketing, and FX.

• Q3 revenue expected up low single digits reported, low to mid single digits constant currency; Q4 revenue to inflect to mid to high single digits.

• Majority of new store openings and benefit of 53rd week to occur in Q4.

• Management expects continued DTC growth and ongoing restructuring charges as Project Fuel progresses through 2025.