Levi Strauss & Co. Reports First-Quarter 2024 Financial Results
- Q1 earnings above expectations with a gross margin increase of 240 BPS.
- Global DTC up 7% with 10% growth in the U.S.
- Diluted loss per share of $(0.03) due to restructuring charges, adjusted diluted EPS of $0.26.
- Company affirms 1-3% FY revenue growth & raises EPS range to $1.17-$1.27.
- Net revenues of $1.6 billion were 8% lower primarily due to the shift in wholesale shipments from Q2 to Q1 2023.
- Americas net revenues decreased 11%, Europe net revenues decreased 7%, Asia net revenues were in line with prior year.
- DTC net revenues increased 7%, wholesale net revenues declined 18%.
- Operating margin was down from 9.3% to (0.03)% due to restructuring charges.
- Adjusted EBIT margin declined to 9.0% from 11.0% last year.
- Gross margin increased to 58.2% from 55.8% in Q1 2023.
- Net loss was $11 million compared to net income of $115 million in Q1 2023.
- Adjusted net income was $103 million compared to $135 million in Q1 2023.
- Diluted loss per share was $(0.03) compared to $0.29 in Q1 2023.
- Adjusted diluted earnings per share was $0.26 compared to $0.34 in Q1 2023.
- Cash and cash equivalents were $517 million, total liquidity was approximately $1.5 billion.
- Total inventories decreased 14% on a dollar basis.
- Company returned approximately $73 million to shareholders in the first quarter.
- Company reaffirms reported net revenues expected to be up 1-3% year-over-year, adjusted diluted EPS range $1.17-$1.27.
- None.
Insights
The reported Q1 earnings of Levi Strauss & Co. show a mixed financial picture, with a gross margin increase to 58.2% indicating improved profitability per item sold, attributed to lower product costs and a favorable mix shift. This is an important metric for investors as gross margin improvements can lead to higher operating leverage. However, the 8% decrease in net revenues and the diluted loss per share of $(0.03) due to restructuring charges reflect challenges in the company's operations. The direct-to-consumer (DTC) segment's growth of 7%, including a 10% increase in the U.S., signals a strategic shift towards more profitable sales channels and may contribute to a more stable revenue base in the long term.
The affirmation of 1-3% FY revenue growth and the raised EPS range to $1.17-$1.27 demonstrate management's confidence in the company's strategic initiatives, like Project Fuel, aimed at improving productivity. The 14% decrease in inventories suggests efficient inventory management, which is critical in the retail sector to minimize holding costs and reduce the risk of markdowns. The company's shareholder returns, including dividends and share repurchases, indicate a commitment to delivering shareholder value, even in a challenging quarter.
Levi Strauss & Co.'s focus on the direct-to-consumer (DTC) channel, which grew by 7% and now represents 48% of total net revenues, aligns with broader retail trends of prioritizing customer experience and brand engagement over traditional wholesale models. This strategic pivot is particularly relevant as e-commerce revenue showed a robust increase, reflecting consumer shopping preferences and the potential for higher margins compared to wholesale.
The company's performance in different geographies, with net revenues in the Americas and Europe being down but Asia remaining steady, suggests a varied impact of regional market conditions and consumer behavior. The decline in Europe and the Americas could be due to macroeconomic factors, such as inflation and supply chain issues, which investors should monitor as they can affect future performance.
The restructuring charges that led to a net loss this quarter highlight the costs associated with transitioning to a more efficient business model. While these charges have impacted short-term earnings, the long-term benefits of Project Fuel could result in a leaner cost structure and better margins. Investors should weigh these short-term losses against the potential for improved operational efficiency.
Levi Strauss & Co.'s decision to exit the Denizen business and the Russian market are strategic moves to focus on core brands and avoid geopolitical risks. While these exits have affected net revenues, such decisions can lead to a more focused brand portfolio and reduced exposure to volatile markets. The raised EPS guidance suggests that the company expects these changes to have a positive impact on profitability.
Q1 Earnings Results Above Expectations
Gross Margin of
Global DTC Up
Diluted Loss Per Share of
Company Affirms 1
“We started the year strong delivering results above expectations, underscoring the power of the Levi’s brand and the progress we are making on our strategic priorities. Both newness and strength in our core offerings are fueling consumer demand and driving meaningful market share gains,” said Michelle Gass, President and CEO of Levi Strauss & Co. “The momentum in our global DTC business continues, with DTC up in all segments. Our efforts to stabilize our wholesale business are delivering results. We are on our way to transforming this company into a best-in-class DTC-first apparel retailer, setting the stage for our next phase of sustainable profitable growth.”
“The structural economics of our business improved in Q1 driven by significant gross margin expansion, disciplined expense controls and efficient working capital management,” said Harmit Singh, Chief Financial and Growth Officer of Levi Strauss & Co. “Our global productivity initiative, Project Fuel, is progressing well and improving the profitability of the company. Looking forward, we are encouraged by trends in our business, around the world, including in
Financial Highlights
-
Net Revenues of
$1.6 billion 8% lower on both a reported and constant-currency basis versus Q1 2023 primarily due to the shift in wholesale shipments from Q2 to Q1 2023 from theU.S. ERP implementation. This shift negatively impacted Q1 2024 over 2023 by approximately$100 million 6% of net revenues. In addition, excluding the impact of the exit of the Denizen business andRussia , net revenues would have been flat to prior year.-
In the
Americas , net revenues decreased11% on a reported and constant-currency basis. Adjusting for the shift in wholesale shipments and the exit of the Denizen business, both theAmericas and theU.S. were up2% . -
In
Europe , net revenues decreased7% on a reported basis and8% on a constant-currency basis; factoring out the impact of theRussia business, net revenues decreased5% on a constant-currency basis. -
Asia net revenues were in line with prior year on a reported basis and up5% on a constant-currency basis, on top of22% growth in the prior year, reflecting growth across most markets. -
Other Brands net revenues decreased
10% on both a reported and constant-currency basis.
-
In the
-
DTC (Direct to Consumer) net revenues increased
7% on a reported basis and8% on a constant-currency basis. DTC growth exceeded total net revenues growth in all segments, including a10% increase in theU.S. and a4% increase inEurope , excludingRussia . Revenues from e-commerce grew13% on a reported basis and12% on a constant-currency basis reflecting double-digit growth across the Levi’s and Beyond Yoga brands. As a percentage of first quarter net revenues, DTC comprised a record48% of total net revenues. -
Wholesale net revenues declined
18% on a reported basis and19% on a constant-currency basis driven primarily by the$100 million U.S. ERP implementation from Q2 to Q1 2023. Global wholesale net revenues were down9% to prior year when normalizing for the shift in wholesale shipments in Q1 2023.
|
|
Net Revenues |
|
|
|
|
|
Operating Income (loss) |
|
|
|
|
|||||||||||||
|
|
Three Months Ended |
|
% Increase (Decrease) |
|
Three Months Ended |
|
% Increase (Decrease) |
|||||||||||||||||
($ millions) |
|
February 25,
|
|
February 26,
|
|
As Reported |
|
Constant Currency |
|
February 25,
|
|
February 26,
|
|
As Reported |
|
Constant Currency |
|||||||||
|
|
$ |
736 |
|
$ |
823 |
|
(11 |
)% |
|
(11 |
)% |
|
$ |
133 |
|
|
$ |
135 |
|
(2 |
)% |
|
(3 |
)% |
|
|
$ |
423 |
|
$ |
455 |
|
(7 |
)% |
|
(8 |
)% |
|
$ |
104 |
|
|
$ |
117 |
|
(12 |
)% |
|
(12 |
)% |
|
|
$ |
289 |
|
$ |
290 |
|
— |
% |
|
5 |
% |
|
$ |
48 |
|
|
$ |
54 |
|
(10 |
)% |
|
(4 |
)% |
Other Brands |
|
$ |
109 |
|
$ |
121 |
|
(10 |
)% |
|
(10 |
)% |
|
$ |
(2 |
) |
|
$ |
3 |
|
(162 |
)% |
|
(157 |
)% |
-
Operating margin of (0.03)% was down from
9.3% in Q1 2023 as a result the restructuring charges taken in the current quarter related to our cost savings initiative, Project Fuel. Adjusted EBIT margin declined 200 basis points to9.0% from11.0% last year on a reported basis due to lower net revenues.-
Gross margin was up 240 basis points to
58.2% from55.8% in Q1 2023 primarily due to lower product costs and favorable mix shift. -
Selling, general and administrative (SG&A) expenses were
$791 million $774 million $766 million $757 million -
Restructuring charges were
$116 million
-
Gross margin was up 240 basis points to
-
Interest and other expenses, net, which include foreign exchange losses, were
$12 million $18 million -
The effective income tax rate was
16.4% compared to17.6% in Q1 2023. -
Net loss was
$11 million $115 million $103 million $135 million -
Diluted loss per share was
$(0.03) $0.29 $0.26 $0.34
|
|
Three Months Ended |
|
Increase (Decrease) As Reported |
|
Increase (Decrease) Constant Currency |
|||||||
($ millions, except per-share amounts) |
|
February 25,
|
|
February 26,
|
|
|
|||||||
Net revenues |
|
$ |
1,558 |
|
|
$ |
1,689 |
|
(8 |
)% |
|
(8 |
)% |
Net (loss) income |
|
$ |
(11 |
) |
|
$ |
115 |
|
(109 |
)% |
|
(109 |
)% |
Adjusted net income |
|
$ |
103 |
|
|
$ |
135 |
|
(24 |
)% |
|
(23 |
)% |
Adjusted EBIT |
|
$ |
141 |
|
|
$ |
185 |
|
(24 |
)% |
|
(23 |
)% |
Diluted (loss) earnings per share |
|
$ |
(0.03 |
) |
|
$ |
0.29 |
|
(32 |
)¢ |
|
(32 |
)¢ |
Adjusted diluted earnings per share |
|
$ |
0.26 |
|
|
$ |
0.34 |
|
(8 |
)¢ |
|
(7 |
)¢ |
Additional information regarding Adjusted SG&A, Adjusted EBIT, Adjusted EBIT margin, Adjusted net income, Adjusted diluted earnings per share, as well as amounts presented on a constant-currency basis, all of which are non-GAAP financial measures, is provided at the end of this press release.
Balance Sheet Review as of February 25, 2024
-
Cash and cash equivalents were
$517 million $1.5 billion -
Total inventories decreased
14% on a dollar basis and21% excluding the impact of the modification of terms with the majority of our suppliers that results in the company taking ownership of inventory for goods being brought into theAmericas closer to the point of shipment rather than destination.
Additional information regarding leverage ratio, which is a non-GAAP financial measure, is provided at the end of this press release.
Shareholder Returns
The company returned approximately
-
Dividends of
$48 million $0.12 -
Share repurchases of
$25 million
As of February 25, 2024, the company had
The company has declared a dividend of
Updated Fiscal 2024 Guidance
-
Company reaffirms reported net revenues are expected to be up
1% to3% year-over-year. -
Adjusted diluted EPS is now expected to be between
$1.17 $1.27 $1.15 $1.25 - More details will be provided during the earnings conference call.
This outlook also assumes no significant worsening of macro-economic pressures on the consumer, inflationary pressures, supply chain disruptions, or currency impacts. A reconciliation of non-GAAP forward looking information to the corresponding GAAP measures cannot be provided without unreasonable efforts due to the challenge in quantifying various items including but not limited to, the effects of foreign currency fluctuations, taxes, and any future restructuring, restructuring-related, severance and other charges.
Investor Conference Call
To access the conference call, please pre-register on https://register.vevent.com/register/BIa7581815e23849aeb508219047dcf7de and you will receive confirmation with dial-in details. A live webcast of the event can be accessed on https://edge.media-server.com/mmc/p/z6wcpcit/.
A replay of the webcast will be available on http://investors.levistrauss.com starting approximately two hours after the event and archived on the site for one quarter.
About Levi Strauss & Co.
Levi Strauss & Co. is one of the world's largest brand-name apparel companies and a global leader in jeanswear. The company designs and markets jeans, casual wear and related accessories for men, women and children under the Levi's®, Dockers®, Signature by Levi Strauss & Co.™, Denizen® and Beyond Yoga® brands. Its products are sold in more than 110 countries worldwide through a combination of chain retailers, department stores, online sites, and a global footprint of approximately 3,200 brand-dedicated stores and shop-in-shops. Levi Strauss & Co.'s reported 2023 net revenues were
Forward Looking Statements
This press release and related conference call contain, in addition to historical information, forward-looking statements, including statements related to: future financial results, including the company's expectations for the full fiscal year 2024 net revenues, adjusted diluted earnings per share and effective tax rate; the ongoing restructuring of our operations and our ability to achieve any anticipated cost savings associated with such restructuring; inflationary pressures; fluctuations in foreign currency exchange rates; global economic conditions; supply chain constraints and disruptions; future dividend payments; future share repurchases; performance of our wholesale and DTC businesses; future inventory levels and our ability to execute against our long-term business strategies. The company has based these forward-looking statements on its current assumptions, expectations and projections about future events. Words such as, but not limited to, “believe,” “will,” “so we can,” “when,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best judgment of senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Investors should consider the information contained in the company's filings with the
Non-GAAP Financial Measures
The company reports its financial results in accordance with generally accepted accounting principles in
Constant-currency
The company reports certain operating results on a constant-currency basis in order to facilitate period-to-period comparisons of its results without regard to the impact of fluctuating foreign currency exchange rates. The term foreign currency exchange rates refers to the exchange rates used to translate the company's operating results for all countries where the functional currency is not the
The company believes disclosure of constant-currency results is helpful to investors because it facilitates period-to-period comparisons of its results by increasing the transparency of the underlying performance by excluding the impact of fluctuating foreign currency exchange rates. However, constant-currency results are non-GAAP financial measures and are not meant to be considered as an alternative or substitute for comparable measures prepared in accordance with GAAP. Constant-currency results have no standardized meaning prescribed by GAAP, are not prepared under any comprehensive set of accounting rules or principles and should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. Constant-currency results have limitations in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.
The company calculates constant-currency amounts by translating local currency amounts in the prior-year period at actual foreign exchange rates for the current period. Constant-currency results do not eliminate the transaction currency impact, which primarily include the realized and unrealized gains and losses recognized from the measurement and remeasurement of purchases and sales of products in a currency other than the functional currency. Additionally, gross margin is impacted by gains and losses related to the procurement of inventory, primarily products sourced in EUR and USD, by the company's global sourcing organization on behalf of its foreign subsidiaries.
Source: Levi Strauss & Co. Investor Relations
LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS |
|||||||
|
(Unaudited) |
|
|
||||
|
February 25,
|
|
November 26,
|
||||
|
|
|
|
||||
|
(Dollars in millions) |
||||||
ASSETS |
|||||||
Current Assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
516.7 |
|
|
$ |
398.8 |
|
Trade receivables, net |
|
661.6 |
|
|
|
752.7 |
|
Inventories |
|
1,150.4 |
|
|
|
1,290.1 |
|
Other current assets |
|
196.1 |
|
|
|
196.0 |
|
Total current assets |
|
2,524.8 |
|
|
|
2,637.6 |
|
Property, plant and equipment, net |
|
673.8 |
|
|
|
680.7 |
|
Goodwill |
|
296.1 |
|
|
|
303.7 |
|
Other intangible assets, net |
|
266.2 |
|
|
|
267.6 |
|
Deferred tax assets, net |
|
761.7 |
|
|
|
729.5 |
|
Operating lease right-of-use assets, net |
|
1,021.5 |
|
|
|
1,033.9 |
|
Other non-current assets |
|
417.4 |
|
|
|
400.6 |
|
Total assets |
$ |
5,961.5 |
|
|
$ |
6,053.6 |
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||
Current Liabilities: |
|
|
|
||||
Accounts payable |
|
497.6 |
|
|
|
567.9 |
|
Accrued salaries, wages and employee benefits |
|
180.9 |
|
|
|
214.9 |
|
Accrued sales returns and allowances |
|
172.5 |
|
|
|
189.8 |
|
Short-term operating lease liabilities |
|
245.6 |
|
|
|
245.5 |
|
Other accrued liabilities |
|
673.8 |
|
|
|
569.4 |
|
Total current liabilities |
|
1,770.4 |
|
|
|
1,787.5 |
|
Long-term debt |
|
1,006.0 |
|
|
|
1,009.4 |
|
Long-term operating lease liabilities |
|
897.8 |
|
|
|
913.1 |
|
Long-term employee related benefits and other liabilities |
|
311.2 |
|
|
|
297.2 |
|
Total liabilities |
|
3,985.4 |
|
|
|
4,007.2 |
|
|
|
|
|
||||
Commitments and contingencies |
|
|
|
||||
|
|
|
|
||||
Stockholders’ Equity: |
|
|
|
||||
Common stock — |
|
0.4 |
|
|
|
0.4 |
|
Additional paid-in capital |
|
692.3 |
|
|
|
686.7 |
|
Accumulated other comprehensive loss |
|
(383.3 |
) |
|
|
(390.9 |
) |
Retained earnings |
|
1,666.7 |
|
|
|
1,750.2 |
|
Total stockholders’ equity |
|
1,976.1 |
|
|
|
2,046.4 |
|
Total liabilities and stockholders’ equity |
$ |
5,961.5 |
|
|
$ |
6,053.6 |
|
The notes accompanying the consolidated financial statements in the company's Form 10-Q for the first quarter of fiscal 2024 are an integral part of these consolidated financial statements.
LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
|
Three Months Ended |
||||||
|
February 25,
|
|
February 26,
|
||||
|
|
|
|
||||
|
(Dollars in millions, except per share amounts) (Unaudited) |
||||||
Net revenues |
$ |
1,557.6 |
|
|
$ |
1,688.9 |
|
Cost of goods sold |
|
651.1 |
|
|
|
746.6 |
|
Gross profit |
|
906.5 |
|
|
|
942.3 |
|
Selling, general and administrative expenses |
|
790.7 |
|
|
|
773.5 |
|
Restructuring charges, net |
|
116.2 |
|
|
|
11.4 |
|
Operating (loss) income |
|
(0.4 |
) |
|
|
157.4 |
|
Interest expense |
|
(10.0 |
) |
|
|
(10.7 |
) |
Other expense, net |
|
(2.3 |
) |
|
|
(7.5 |
) |
(Loss) income before income taxes |
|
(12.7 |
) |
|
|
139.2 |
|
Income tax (benefit) expense |
|
(2.1 |
) |
|
|
24.5 |
|
Net (loss) income |
$ |
(10.6 |
) |
|
$ |
114.7 |
|
(Loss) earnings per common share attributable to common stockholders: |
|
|
|
||||
Basic |
$ |
(0.03 |
) |
|
$ |
0.29 |
|
Diluted |
$ |
(0.03 |
) |
|
$ |
0.29 |
|
Weighted-average common shares outstanding: |
|
|
|
||||
Basic |
|
398,941,172 |
|
|
|
395,956,182 |
|
Diluted |
|
398,941,172 |
|
|
|
400,360,529 |
|
The notes accompanying the consolidated financial statements in the company's Form 10-Q for the first quarter of fiscal 2024 are an integral part of these consolidated financial statements.
LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
|
Three Months Ended |
||||||
|
February 25,
|
|
February 26,
|
||||
|
|
|
|
||||
|
(Dollars in millions) (Unaudited) |
||||||
Cash Flows from Operating Activities: |
|
|
|
||||
Net (loss) income |
$ |
(10.6 |
) |
|
$ |
114.7 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
|
44.6 |
|
|
|
39.6 |
|
Goodwill impairment |
|
5.5 |
|
|
|
— |
|
Property, plant, equipment impairment, and early lease terminations, net |
|
— |
|
|
|
14.9 |
|
Stock-based compensation |
|
18.7 |
|
|
|
17.6 |
|
Deferred income taxes |
|
(32.7 |
) |
|
|
(7.9 |
) |
Other, net |
|
3.4 |
|
|
|
(2.8 |
) |
Net change in operating assets and liabilities |
|
257.1 |
|
|
|
(336.9 |
) |
Net cash provided by (used for) operating activities |
|
286.0 |
|
|
|
(160.8 |
) |
Cash Flows from Investing Activities: |
|
|
|
||||
Purchases of property, plant and equipment |
|
(71.6 |
) |
|
|
(110.9 |
) |
Proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting, net |
|
0.8 |
|
|
|
21.0 |
|
Proceeds from sale, maturity and collection of short-term investments |
|
— |
|
|
|
70.8 |
|
Other investing, net |
|
(0.9 |
) |
|
|
— |
|
Net cash used for investing activities |
|
(71.7 |
) |
|
|
(19.1 |
) |
Cash Flows from Financing Activities: |
|
|
|
||||
Proceeds from senior revolving credit facility |
|
— |
|
|
|
150.0 |
|
Repurchase of common stock |
|
(25.0 |
) |
|
|
(8.1 |
) |
Tax withholdings on equity awards |
|
(15.3 |
) |
|
|
(18.6 |
) |
Dividends to stockholders |
|
(47.9 |
) |
|
|
(47.6 |
) |
Other financing activities, net |
|
(6.3 |
) |
|
|
2.1 |
|
Net cash (used for) provided by financing activities |
|
(94.5 |
) |
|
|
77.8 |
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash |
|
(1.9 |
) |
|
|
(5.7 |
) |
Net increase (decrease) in cash and cash equivalents and restricted cash |
|
117.9 |
|
|
|
(107.8 |
) |
Beginning cash and cash equivalents |
|
398.8 |
|
|
|
429.6 |
|
Ending cash and cash equivalents |
$ |
516.7 |
|
|
$ |
321.8 |
|
|
|
|
|
||||
Noncash Investing Activity: |
|
|
|
||||
Property, plant and equipment acquired and not yet paid at end of period |
$ |
26.3 |
|
|
$ |
39.3 |
|
Supplemental disclosure of cash flow information: |
|
|
|
||||
Cash paid for income taxes during the period, net of refunds |
|
17.4 |
|
|
|
1.7 |
|
The notes accompanying the consolidated financial statements in the company's Form 10-Q for the first quarter of fiscal 2024 are an integral part of these consolidated financial statements.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
FOR THE FIRST QUARTER OF 2024
The following information relates to non-GAAP financial measures, and should be read in conjunction with the investor call held on April 3, 2024, discussing the company’s financial condition and results of operations as of and for the quarter and year ended February 25, 2024.
We define the following non-GAAP measures as follows:
Most comparable GAAP measure |
|
Non-GAAP measure |
|
Non-GAAP measure definition |
Selling, general and administration (“SG&A”) expenses |
|
Adjusted SG&A |
|
SG&A expenses excluding acquisition and integration related charges, property, plant, and equipment, right-of-use asset impairment, and early lease terminations, net and restructuring related charges, severance and other, net |
SG&A margin |
|
Adjusted SG&A margin |
|
Adjusted SG&A as a percentage of net revenues |
Net (loss) income |
|
Adjusted EBIT |
|
Net (loss) income excluding income tax (benefit) expense, interest expense, other expense (income), net, acquisition and integration related charges, property, plant, equipment, right-of-use asset impairment and early lease terminations, net, goodwill and other intangible asset impairment charges, and restructuring and restructuring related charges, severance and other, net |
Net (loss) income margin |
|
Adjusted EBIT margin |
|
Adjusted EBIT as a percentage of net revenues |
Net (loss) income |
|
Adjusted EBITDA |
|
Adjusted EBIT excluding depreciation and amortization expense |
Net (loss) income |
|
Adjusted net income |
|
Net (loss) income excluding acquisition and integration related charges, property, plant, equipment, right-of-use asset impairment charges and early lease terminations, net, goodwill and other intangible asset impairment charges, restructuring and restructuring related charges, severance and other, net, adjusted to give effect to the income tax impact of such adjustments. |
Net (loss) income margin |
|
Adjusted net income margin |
|
Adjusted net income as a percentage of net revenues |
Diluted (loss) earnings per share |
|
Adjusted diluted earnings per share |
|
Adjusted net (loss) income per weighted-average number of diluted common shares outstanding |
Adjusted SG&A:
|
Three Months Ended |
||||||
|
February 25,
|
|
February 26,
|
||||
|
|
|
|
||||
|
(Dollars in millions) |
||||||
|
(Unaudited) |
||||||
Most comparable GAAP measure: |
|
|
|
||||
Selling, general and administrative expenses |
$ |
790.7 |
|
|
$ |
773.5 |
|
|
|
|
|
||||
Non-GAAP measure: |
|
|
|
||||
Selling, general and administrative expenses |
$ |
790.7 |
|
|
$ |
773.5 |
|
Acquisition and integration related charges(1) |
|
(4.0 |
) |
|
|
(1.3 |
) |
Property, plant, equipment, right-of-use asset impairment, and early lease terminations, net(2) |
|
— |
|
|
|
(14.7 |
) |
Goodwill and other intangible asset impairment charges(3) |
|
(5.5 |
) |
|
|
— |
|
Restructuring related charges, severance and other, net(4) |
|
(15.4 |
) |
|
|
(0.5 |
) |
Adjusted SG&A |
$ |
765.8 |
|
|
$ |
757.0 |
|
|
|
|
|
||||
SG&A margin |
|
50.8 |
% |
|
|
45.8 |
% |
Adjusted SG&A margin |
|
49.2 |
% |
|
|
44.8 |
% |
_____________
(1) |
Acquisition and integration related charges includes acquisition-related compensation subject to the continued employment of certain Beyond Yoga® employees. In the first quarter of 2024, their employment ceased, resulting in the acceleration of the remaining compensation. |
(2) |
For the three-month period ended February 26, 2023, property, plant, equipment, right-of-use asset impairment, and early lease terminations, net includes |
(3) |
For the three-month period ended February 25, 2024, goodwill and other intangible asset impairment charges includes the recognition of a |
(4) |
For the three-month period ended February 25, 2024, restructuring related charges, severance, and other, net primarily relates to consulting costs associated with our restructuring initiative of |
Adjusted EBIT and Adjusted EBITDA:
The following table presents a reconciliation of net income, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBIT and Adjusted EBITDA for each of the periods presented.
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
February 25,
|
|
February 26,
|
|
February 25,
|
|
February 26,
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(Dollars in millions) |
||||||||||||||
|
(Unaudited) |
||||||||||||||
Most comparable GAAP measure: |
|
|
|
|
|
|
|
||||||||
Net (loss) income |
$ |
(10.6 |
) |
|
$ |
114.7 |
|
|
$ |
124.3 |
|
|
$ |
488.0 |
|
|
|
|
|
|
|
|
|
||||||||
Non-GAAP measure: |
|
|
|
|
|
|
|
||||||||
Net (loss) income |
$ |
(10.6 |
) |
|
$ |
114.7 |
|
|
$ |
124.3 |
|
|
$ |
488.0 |
|
Income tax (benefit) expense |
|
(2.1 |
) |
|
|
24.5 |
|
|
|
(11.0 |
) |
|
|
54.9 |
|
Interest expense |
|
10.0 |
|
|
|
10.7 |
|
|
|
45.2 |
|
|
|
32.2 |
|
Other expense (income), net |
|
2.3 |
|
|
|
7.5 |
|
|
|
37.0 |
|
|
|
(5.4 |
) |
Acquisition and integration related charges(1) |
|
4.0 |
|
|
|
1.3 |
|
|
|
7.7 |
|
|
|
5.2 |
|
Property, plant, equipment, right-of-use asset impairment and early lease terminations, net(2) |
|
— |
|
|
|
14.7 |
|
|
|
48.7 |
|
|
|
39.7 |
|
Goodwill and other intangible asset impairment charges(3) |
|
5.5 |
|
|
|
— |
|
|
|
95.7 |
|
|
|
11.6 |
|
Restructuring and restructuring related charges, severance and other, net(4) |
|
131.6 |
|
|
|
11.9 |
|
|
|
162.6 |
|
|
|
34.2 |
|
Adjusted EBIT |
$ |
140.7 |
|
|
$ |
185.3 |
|
|
$ |
510.2 |
|
|
$ |
660.4 |
|
Depreciation and amortization |
|
43.5 |
|
|
|
38.4 |
|
|
|
165.9 |
|
|
|
155.1 |
|
Adjusted EBITDA |
$ |
184.2 |
|
|
$ |
223.7 |
|
|
$ |
676.1 |
|
|
$ |
815.5 |
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income margin |
|
(0.7 |
)% |
|
|
6.8 |
% |
|
|
|
|
||||
Adjusted EBIT margin |
|
9.0 |
% |
|
|
11.0 |
% |
|
|
|
|
||||
_____________
(1) |
Acquisition and integration related charges includes acquisition-related compensation subject to the continued employment of certain Beyond Yoga® employees. In the first quarter of 2024, their employment ceased, resulting in the acceleration of the remaining compensation. |
(2) |
For the three-month period ended February 26, 2023, property, plant, equipment, right-of-use asset impairment, and early lease terminations, net includes |
(3) |
For the three-month period ended February 25, 2024, goodwill and other intangible asset impairment charges includes the recognition of a |
(4) |
For the three-month period ended February 25, 2024, restructuring and restructuring related charges, severance, and other, net primarily includes net restructuring charges of |
For the three-month period ended February 26, 2023, restructuring and restructuring related charges, severance and other, net includes net restructuring charges of |
Adjusted Net Income:
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
February 25,
|
|
February 26,
|
|
February 25,
|
|
February 26,
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(Dollars in millions, except per share amounts) |
||||||||||||||
|
(Unaudited) |
||||||||||||||
Most comparable GAAP measure: |
|
|
|
|
|
|
|
||||||||
Net (loss) income |
$ |
(10.6 |
) |
|
$ |
114.7 |
|
|
$ |
124.3 |
|
|
$ |
488.0 |
|
|
|
|
|
|
|
|
|
||||||||
Non-GAAP measure: |
|
|
|
|
|
|
|
||||||||
Net (loss) income |
$ |
(10.6 |
) |
|
$ |
114.7 |
|
|
$ |
124.3 |
|
|
$ |
488.0 |
|
Acquisition and integration related charges(1) |
|
4.0 |
|
|
|
1.3 |
|
|
|
7.7 |
|
|
|
5.2 |
|
Property, plant, equipment, right-of-use asset impairment and early lease terminations, net(2) |
|
— |
|
|
|
14.7 |
|
|
|
48.7 |
|
|
|
39.7 |
|
Goodwill and other intangible asset impairment charges(3) |
|
5.5 |
|
|
|
— |
|
|
|
95.7 |
|
|
|
11.6 |
|
Restructuring and restructuring related charges, severance and other, net(4) |
|
131.6 |
|
|
|
11.9 |
|
|
|
162.6 |
|
|
|
34.2 |
|
Pension settlement loss |
|
— |
|
|
|
— |
|
|
|
19.0 |
|
|
|
— |
|
Unrealized gains on marketable securities |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19.9 |
) |
Tax impact of adjustments(5) |
|
(27.8 |
) |
|
|
(7.7 |
) |
|
|
(49.5 |
) |
|
|
(9.2 |
) |
Adjusted net income |
$ |
102.7 |
|
|
$ |
134.9 |
|
|
$ |
408.5 |
|
|
$ |
549.6 |
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income margin |
|
(0.7 |
)% |
|
|
6.8 |
% |
|
|
|
|
||||
Adjusted net income margin |
|
6.6 |
% |
|
|
8.0 |
% |
|
|
|
|
||||
_____________
(1) |
Acquisition and integration related charges includes acquisition-related compensation subject to the continued employment of certain Beyond Yoga® employees. In the first quarter of 2024, their employment ceased, resulting in the acceleration of the remaining compensation. |
(2) |
For the three-month period ended February 26, 2023, property, plant, equipment, right-of-use asset impairment, and early lease terminations, net includes |
(3) |
For the three-month period ended February 25, 2024, goodwill and other intangible asset impairment charges includes the recognition of a |
(4) |
For the three-month period ended February 25, 2024, restructuring and restructuring related charges, severance, and other, net primarily includes net restructuring charges of |
|
For the three-month period ended February 26, 2023, restructuring and restructuring related charges, severance and other, net includes net restructuring charges of |
(5) |
Tax impact calculated using the annual effective tax rate, excluding discrete costs and benefits. |
Adjusted Diluted Earnings per Share:
|
Three Months Ended |
||||||
|
February 25,
|
|
February 26,
|
||||
|
|
|
|
||||
|
(Unaudited) |
||||||
Most comparable GAAP measure: |
|
|
|
||||
Diluted (loss) earnings per share(1) |
$ |
(0.03 |
) |
|
$ |
0.29 |
|
|
|
|
|
||||
Non-GAAP measure: |
|
|
|
||||
Diluted (loss) earnings per share |
$ |
(0.03 |
) |
|
$ |
0.29 |
|
Acquisition and integration related charges(2) |
|
0.01 |
|
|
|
— |
|
Property, plant, equipment, right-of-use asset impairment and early lease terminations, net(3) |
|
— |
|
|
|
0.04 |
|
Goodwill and other intangible asset impairment charges(4) |
|
0.02 |
|
|
|
— |
|
Restructuring and restructuring related charges, severance and other, net(5) |
|
0.33 |
|
|
|
0.03 |
|
Tax impact of adjustments(6) |
|
(0.07 |
) |
|
|
(0.02 |
) |
Adjusted diluted earnings per share(1) |
$ |
0.26 |
|
|
$ |
0.34 |
|
_____________
(1) |
For the three-month period ending February 25, 2024, 398.9 million shares were used in the calculation of diluted loss per share and 402.6 million were used in the calculation of adjusted diluted earnings per share. The dilutive effect of stock awards of 3.6 million were not included in the calculation of diluted loss per share as the inclusion of these securities would have been anti-dilutive. |
(2) |
Acquisition and integration related charges includes acquisition-related compensation subject to the continued employment of certain Beyond Yoga® employees. In the first quarter of 2024, their employment ceased, resulting in the acceleration of the remaining compensation. |
(3) |
For the three-month period ended February 26, 2023, property, plant, equipment, right-of-use asset impairment, and early lease terminations, net includes |
(4) |
For the three-month period ended February 25, 2024, goodwill and other intangible asset impairment charges includes the recognition of a |
(5) |
For the three-month period ended February 25, 2024, restructuring and restructuring related charges, severance, and other, net primarily includes net restructuring charges of |
|
For the three-month period ended February 26, 2023, restructuring and restructuring related charges, severance and other, net includes net restructuring charges of |
(6) |
Tax impact calculated using the annual effective tax rate, excluding discrete costs and benefits. |
Adjusted Free Cash Flow:
We define Adjusted free cash flow, a non-GAAP financial measure, as net cash flow from operating activities less purchases of property, plant and equipment. We believe Adjusted free cash flow is an important liquidity measure of the cash that is available after capital expenditures for operational expenses and investment in our business. We believe Adjusted free cash flow is useful to investors because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet, invest in future growth and return capital to stockholders.
The following table presents a reconciliation of net cash flow from operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted free cash flow for each of the periods presented.
|
Three Months Ended |
||||||
|
February 25,
|
|
February 26,
|
||||
|
|
|
|
||||
|
(Dollars in millions) |
||||||
|
(Unaudited) |
||||||
Most comparable GAAP measure: |
|
|
|
||||
Net cash provided by (used for) operating activities |
$ |
286.0 |
|
|
$ |
(160.8 |
) |
Net cash used for investing activities |
|
(71.7 |
) |
|
|
(19.1 |
) |
Net cash (used for) provided by financing activities |
|
(94.5 |
) |
|
|
77.8 |
|
Non-GAAP measure: |
|
|
|
||||
|
|
|
|
||||
Net cash provided by (used for) operating activities |
$ |
286.0 |
|
|
$ |
(160.8 |
) |
Purchases of property, plant and equipment |
|
(71.6 |
) |
|
|
(110.9 |
) |
Adjusted free cash flow |
$ |
214.4 |
|
|
$ |
(271.7 |
) |
Return on Invested Capital:
We define Return on invested capital ("ROIC") as the trailing four quarters of Adjusted net income before interest and after taxes divided by the average trailing five quarters of total invested capital. We define earnings before interest and after taxes as Adjusted net income plus interest expense and income tax expense less an income tax adjustment. We define total invested capital as total debt plus shareholders' equity less cash and short-term investments. We believe ROIC is useful to investors as it quantifies how efficiently we generated operating income relative to the capital we have invested in the business.
Our calculation of ROIC is considered a non-GAAP financial measure because we calculate ROIC using the non-GAAP metric Adjusted net income. Although ROIC is a standard financial metric, numerous methods exist for calculating a company's ROIC. As a result, the method we use to calculate our ROIC may differ from the methods used by other companies. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP.
The table below sets forth the calculation of ROIC for each of the periods presented.
|
Trailing Four Quarters |
||||||
|
February 25,
|
|
February 26,
|
||||
|
|
|
|
||||
|
(Dollars in millions) |
||||||
|
(Unaudited) |
||||||
Net income |
$ |
124.3 |
|
|
$ |
488.0 |
|
|
|
|
|
||||
Numerator |
|
|
|
||||
Adjusted net income(1) |
$ |
408.5 |
|
|
$ |
549.6 |
|
Interest expense |
|
45.2 |
|
|
|
32.2 |
|
Adjusted income tax expense |
|
38.5 |
|
|
|
64.2 |
|
Adjusted net income before interest and taxes |
|
492.2 |
|
|
|
646.0 |
|
Income tax adjustment(2) |
|
(42.3 |
) |
|
|
(67.6 |
) |
Adjusted net income before interest and after taxes |
$ |
449.9 |
|
|
$ |
578.4 |
|
_____________
(1) |
Adjusted net income is reconciled from net income which is the most comparable GAAP measure. Refer to Adjusted Net Income table for more information. |
(2) |
Tax impact calculated using the trailing four quarters effective tax rate, excluding discrete costs and benefits. |
|
Average Trailing Five Quarters |
||||||
|
February 25,
|
|
February 26,
|
||||
|
|
|
|
||||
|
(Dollars in millions) |
||||||
|
(Unaudited) |
||||||
Denominator |
|
|
|
||||
Total debt, including operating lease liabilities |
$ |
2,179.8 |
|
|
$ |
2,163.5 |
|
Shareholders' equity |
|
1,973.8 |
|
|
|
1,830.4 |
|
Cash and Short-term investments |
|
(400.7 |
) |
|
|
(579.4 |
) |
Total invested Capital |
$ |
3,752.9 |
|
|
$ |
3,414.5 |
|
|
|
|
|
||||
Net income to Total invested capital |
|
3.3 |
% |
|
|
14.3 |
% |
Return on Invested Capital |
|
12.0 |
% |
|
|
16.9 |
% |
Constant-Currency:
We calculate constant-currency amounts by translating local currency amounts in the comparison period at actual foreign exchange rates for the current period.
Constant-Currency Net Revenues:
The table below sets forth the calculation of net revenues by segment on a constant-currency basis for the comparison period applicable to the three-month period ended February 25, 2024:
|
Three Months Ended |
||||||||
|
February 25,
|
|
February 26,
|
|
% Increase (Decrease) |
||||
|
|
|
|
|
|
||||
|
(Dollars in millions) |
||||||||
|
(Unaudited) |
||||||||
Total net revenues |
|
|
|
|
|
||||
As reported |
$ |
1,557.6 |
|
$ |
1,688.9 |
|
|
(7.8 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
(0.8 |
) |
|
* |
|
Constant-currency net revenues |
$ |
1,557.6 |
|
$ |
1,688.1 |
|
|
(7.7 |
)% |
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
As reported |
$ |
735.8 |
|
$ |
823.0 |
|
|
(10.6 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
7.9 |
|
|
* |
|
Constant-currency net revenues - |
$ |
735.8 |
|
$ |
830.9 |
|
|
(11.4 |
)% |
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
As reported |
$ |
423.5 |
|
$ |
455.1 |
|
|
(7.0 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
5.2 |
|
|
* |
|
Constant-currency net revenues - |
$ |
423.5 |
|
$ |
460.3 |
|
|
(8.0 |
)% |
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
As reported |
$ |
288.8 |
|
$ |
289.5 |
|
|
(0.3 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
(14.4 |
) |
|
* |
|
Constant-currency net revenues - |
$ |
288.8 |
|
$ |
275.1 |
|
|
5.0 |
% |
|
|
|
|
|
|
||||
Other Brands |
|
|
|
|
|
||||
As reported |
$ |
109.5 |
|
$ |
121.3 |
|
|
(9.7 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
0.5 |
|
|
* |
|
Constant-currency net revenues - Other Brands |
$ |
109.5 |
|
$ |
121.8 |
|
|
(10.1 |
)% |
___________
* Not meaningful
The table below sets forth the calculation of net revenues by channel on a constant-currency basis for the comparison period applicable to the three-month period ended February 25, 2024:
|
Three Months Ended |
||||||||
|
February 25,
|
|
February 26,
|
|
% Increase (Decrease) |
||||
|
|
|
|
|
|
||||
|
(Dollars in millions) |
||||||||
|
(Unaudited) |
||||||||
Total net revenues |
|
|
|
|
|
||||
As reported |
$ |
1,557.6 |
|
$ |
1,688.9 |
|
|
(7.8 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
(0.8 |
) |
|
* |
|
Constant-currency net revenues |
$ |
1,557.6 |
|
$ |
1,688.1 |
|
|
(7.7 |
)% |
|
|
|
|
|
|
||||
Wholesale |
|
|
|
|
|
||||
As reported |
$ |
803.5 |
|
$ |
984.9 |
|
|
(18.4 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
3.5 |
|
|
* |
|
Constant-currency net revenues - Wholesale |
$ |
803.5 |
|
$ |
988.4 |
|
|
(18.7 |
)% |
|
|
|
|
|
|
||||
DTC |
|
|
|
|
|
||||
As reported |
$ |
754.1 |
|
$ |
704.0 |
|
|
7.1 |
% |
Impact of foreign currency exchange rates |
|
— |
|
|
(4.3 |
) |
|
* |
|
Constant-currency net revenues - DTC |
$ |
754.1 |
|
$ |
699.7 |
|
|
7.8 |
% |
___________
* Not meaningful
Constant-Currency Adjusted EBIT and Constant Currency Adjusted EBIT margin:
|
Three Months Ended |
|||||||||
|
February 25,
|
|
February 26,
|
|
% (Decrease) |
|||||
|
|
|
|
|
|
|||||
|
(Dollars in millions) |
|||||||||
|
(Unaudited) |
|||||||||
Adjusted EBIT(1) |
$ |
140.7 |
|
|
$ |
185.3 |
|
|
(24.1 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
|
(1.6 |
) |
|
* |
|
Constant-currency Adjusted EBIT |
$ |
140.7 |
|
|
$ |
183.7 |
|
|
(23.4 |
)% |
|
|
|
|
|
|
|||||
Adjusted EBIT margin |
|
9.0 |
% |
|
|
11.0 |
% |
|
(18.2 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
|
(0.1 |
) |
|
* |
|
Constant-currency Adjusted EBIT margin(2) |
|
9.0 |
% |
|
|
10.9 |
% |
|
(17.4 |
)% |
_____________
(1) |
Adjusted EBIT is reconciled from net (loss) income which is the most comparable GAAP measure. Refer to Adjusted EBIT and Adjusted EBITDA table for more information. |
(2) |
We define constant-currency Adjusted EBIT margin as constant-currency Adjusted EBIT as a percentage of constant-currency net revenues. |
* Not meaningful
Constant-Currency Adjusted Net Income and Adjusted Diluted Earnings per Share:
|
Three Months Ended |
|||||||||
|
February 25,
|
|
February 26,
|
|
% (Decrease) |
|||||
|
|
|
|
|
|
|||||
|
(Dollars in millions, except per share amounts) |
|||||||||
|
(Unaudited) |
|||||||||
Adjusted net income(1) |
$ |
102.7 |
|
|
$ |
134.9 |
|
|
(23.9 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
|
(2.2 |
) |
|
* |
|
Constant-currency Adjusted net income |
$ |
102.7 |
|
|
$ |
132.7 |
|
|
(22.6 |
)% |
Constant-currency Adjusted net income margin(2) |
|
6.6 |
% |
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|||||
Adjusted diluted earnings per share |
$ |
0.26 |
|
|
$ |
0.34 |
|
|
(23.5 |
)% |
Impact of foreign currency exchange rates |
|
— |
|
|
|
(0.01 |
) |
|
* |
|
Constant-currency Adjusted diluted earnings per share |
$ |
0.26 |
|
|
$ |
0.33 |
|
|
(21.2 |
)% |
_____________
(1) |
Adjusted net income is reconciled from net (loss) income which is the most comparable GAAP measure. Refer to Adjusted net income table for more information. |
(2) |
We define constant-currency Adjusted net income margin as constant-currency Adjusted net income as a percentage of constant-currency net revenues. |
* Not meaningful
View source version on businesswire.com: https://www.businesswire.com/news/home/20240403869087/en/
Investor Contact:
Aida Orphan
Levi Strauss & Co.
(415) 501-6194
Investor-Relations@levi.com
Media Contact:
Elizabeth Owen
Levi Strauss & Co.
(415) 501-7777
NewsMediaRequests@levi.com
Source: Levi Strauss & Co.
FAQ
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