Levi Strauss & Co (LEVI) Q3 2024 earnings summary

Executive summary

• Q3 net revenues were $1.52 billion, up 0.4% year-over-year and 2% in constant currency, with Levi's brand up 5% globally, marking its best growth in two years.

• DTC sales rose 10% (12% in constant currency), now 44% of total revenues, with e-commerce up 16% and U.S. DTC up 12%; DTC growth offset wholesale declines.

• Gross margin reached a record 60%, up 440 basis points year-over-year, driven by lower product costs and favorable channel/brand mix.

• Strategic focus is shifting to Levi's and Beyond Yoga, with Dockers under review for potential sale due to underperformance; Denizen and footwear businesses exited earlier in the year.

• A new global campaign with Beyoncé is expected to drive further brand momentum into 2025.

Financial highlights

• Q3 net revenues: $1.52 billion (+0.4% year-over-year); gross profit: $911 million; gross margin: 60% (up 440 bps); adjusted EBIT: $175 million (+27%), margin 11.6%.

• Adjusted diluted EPS was $0.33, up 18% year-over-year; reported diluted EPS was $0.05, impacted by a $111 million non-cash impairment charge for Beyond Yoga.

• Net income for Q3 was $21 million, up from $10 million in Q3 2023; adjusted net income was $132 million, up 18%.

• Inventory dollars were down 7% year-over-year, with a healthy composition and expectations to end the year lower than prior year.

• Cash and cash equivalents stood at $577 million; total liquidity was approximately $1.3 billion.

Outlook and guidance

• Fiscal 2024 reported net revenues expected to grow ~1%; constant-currency net revenues to grow 1.5%-2%.

• Adjusted diluted EPS expected at the midpoint of $1.17 to $1.27 guidance range.

• Full-year gross margin expected to expand 180-270 basis points; EBIT margin to be slightly above 10%.

• Full-year SG&A to rise 4%, with Project Fuel savings of $50 million mitigating some expense growth.

• Outlook assumes no significant worsening of macroeconomic, inflationary, supply chain, or currency conditions.