Demand is not slowing down Levi Strauss confirms the optimistic forecast
Last week, the owner of the fashion jeans brands Levi Strauss (LEVI) reported the results of the first quarter of 2022 much higher than the expectations of Wall Street analysts. The data show that the demand for the company’s clothing is not slowing down, which allowed the management to confirm its optimistic growth forecast for the whole of 2022. In the first quarter, Levi Strauss sales grew by 26% year-on-year.
Compared to the first quarter of 2020, when the impact of COVID was still minimal, the growth was an impressive 13%. The company emphasizes that large-scale growth in all markets and across all sales channels. The growth in the direct sales segment of Levi Strauss was high — revenue grew by 35% year-on-year.
A large volume of more marginal direct sales and consumer attention to premium Levi Strauss products helped offset the pressure from rising wage costs and the delivery chain. Gross profit margin reached 59% of sales, and adjusted operating margin increased to 14.9% of sales compared to 13.3% a year ago. Adjusted net profit increased by 35% to $189 million. Despite some negative geopolitical factors and expected inflation, Levi Strauss confirms its earlier forecast for 2022.
In particular, the sales volume should be from $6.4 billion to $6.5 billion, which corresponds to an increase of 11-13% year-on-year. Profitability is likely to remain above 12% of sales. This may lead to an increase in dividends and a share repurchase program. In addition, it provides Levi Strauss with scope for large-scale investments. The company is likely to continue its transformation aimed at reducing partner stores and increasing the number of its own brand points of sale.
Besides this, Levi Strauss can adjust the range by expanding the range of new premium products, which are now particularly in demand among consumers. Levi Strauss is also not immune from the economic downturn and the subsequent decline in consumer activity, because this forecast may change.
