Levi Strauss Faces Challenges Ahead, Despite Strong Q4 Performance
The denim giant Levi Strauss has issued a cautious outlook for its current fiscal year, citing unfavorable currency exchange rates, one fewer selling week, and a loss in revenue from its Denizen and footwear businesses. Despite a strong fourth-quarter performance, the company expects sales to decline between 1% and 2%, falling short of estimates.
Q4 Highlights: A Strong Finish to Fiscal 2024
Levi Strauss reported net income of $182.6 million, or 46 cents per share, exceeding expectations. Excluding one-time expenses, the company’s adjusted net income was $202 million, or 50 cents per share. Sales rose 12% to $1.84 billion, with organic sales growing 8% when excluding foreign exchange effects and divested businesses.
CEO Michelle Gass: Focus on Higher Margin Sales and Female Customers
Under CEO Michelle Gass’s leadership, Levi Strauss has been working to cut unprofitable aspects of the business, grow higher margin sales on its website and stores, and boost profitability. The company has also made a concerted effort to attract more female customers, who tend to spend more money and shop for new clothes more frequently. Women’s apparel now accounts for 36% of Levi’s overall business, up from a year ago.
Marketing Partnership with Beyoncé Drives Demand
Levi Strauss’s high-profile marketing partnership with Beyoncé has been a major success, driving demand across the business. The company has also seen strong sales increases across all regions, brands, and channels, with sales in the Americas growing 12%, Europe increasing 15%, and Asia expanding 9%.
Tariffs and Pricing: A Cautious Approach
Levi Strauss’s finance chief, Harmit Singh, said the company is taking a cautious approach to tariffs, working with suppliers to minimize the impact on consumers. While the company sources products from 25 countries, less than 1% of its products come from China, which has been threatened with 10% tariffs.
Record Gross Margin and Impairment Charges
Levi Strauss reported a record gross margin of 61.3%, driven by lower product costs, higher full-price sales, and a better mix between direct and wholesale revenue. However, the company also reported $111.4 million in impairment charges related to its Beyond Yoga brand, bringing total costs to $201.6 million since acquiring the athleisure company in 2021.
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