Levi Strauss Records a Loss in the First Quarter After Booking a Restructuring Charge and Raising Its Outlook for the Year. The Jeans Manufacturer is Increasingly Focusing on Its Direct Sales to Offset Declining Wholesale Revenue.
The San Francisco-based company reported a net loss of $11 million or 3 cents per share for the quarter ending February 25, compared to a profit of $115 million or 29 cents per share in the same period last year. Analysts had forecast a profit of 8 cents according to FactSet.
Levi Strauss Books a $116 Million Restructuring Charge After Cutting Its Workforce by 12% in the Quarter. "We have reviewed the areas where we can simplify work and increase the focus on the direct customer," Chief Financial Officer Harmit Singh said in an interview with The Wall Street Journal. In the quarter, the company also closed a footwear business in Europe within its Levi's brand.
Excluding one-time items, earnings per share amounted to 26 cents, thereby exceeding Wall Street expectations of 21 cents.
Revenue fell by 8% to $1.56 billion, which was above analysts' estimates of $1.55 billion according to FactSet. The company's revenue losses were impacted by a one-time plummet of approximately $100 million in wholesale revenues in the USA and a decline of 7% in wholesale revenues in Europe, while the direct-to-customer business grew by 7% overall during the reporting period.
Despite the impacts that the declining wholesale business has on the performance of the company and other industry players, Levi expects to end the fiscal year with a lower inventory than the previous year.
"We are turning our products over more quickly, purchasing more in line with forecasted demand, so that inventory significantly improves and leads to higher free cash flow," said Singh. The company is using the additional cash flow for dividends, stock repurchases, and the acquisition of a distribution company in Colombia, among other investments, the executive added.
Singh spoke positively about the company's wholesale business in Europe, where a return to growth is expected for the second half of the year, and Levi has raised its full-year earnings forecast to $1.17 to $1.27 per share from previously $1.15 to $1.25 per share. Analysts expect a lower full-year result of $1.15 per share.
"We've made a strong start," said Singh. "We also feel much better about the US consumer."
