Levi Strauss & Co. (LEVI) Stock: Falls After Q3 Revenue Hits $1.6B and DTC Growth Disappoints 

TLDR

• LEVI falls after Q3 revenue hits $1.6 billion despite stronger profit margins.
• Direct-to-consumer revenue rises 2% as U.S. sales stay under continued pressure.
• Adjusted EPS climbs to $0.48 as quarterly net income reaches $169 million now.
• Levi Strauss raises full-year EPS guidance to a range of $1.54 to $1.56 per share.
• Company plans a $100 million share buyback and raises its quarterly dividend.

Levi Strauss & Co. shares fell after the company reported higher third-quarter revenue but weaker direct-to-consumer growth. LEVI closed at $19.51, down 4.97%, then slipped another 1.18% to $19.28 after hours. However, stronger margins and higher profit guidance provided support against concerns surrounding slower U.S. and DTC demand.

Levi Strauss & Co., LEVI

Levi Strauss Q3 Revenue Reaches $1.6 Billion

Levi Strauss reported third-quarter net revenue of $1.61 billion, representing 4% reported growth from a year earlier. Organic revenue increased 5%, supported by gains across Europe, Asia, wholesale, and the Beyond Yoga business. However, U.S. revenue declined 1%, creating pressure on the company’s largest regional market.

The Americas generated $839 million in revenue, up 4% from $806 million one year earlier. Europe produced $442 million, while Asia generated $293 million as reported sales increased 4% and 5%, respectively. Meanwhile, Beyond Yoga revenue rose 9% to $36 million during the quarter.

Profitability strengthened sharply as operating margin reached 13.8%, compared with 10.8% one year earlier. Adjusted EBIT margin increased to 15.5%, while gross margin expanded 450 basis points to 66.2%. Tariff refunds contributed significantly to the margin improvement, although Levi Strauss reinvested part of the benefit.

DTC Growth Misses Levi Strauss Expectations

Direct-to-consumer revenue increased only 2%, while comparable sales remained nearly flat during the third quarter. DTC accounted for 45% of total company revenue, making its slower growth a key earnings concern. Furthermore, the U.S. DTC business declined 1% despite stronger performance across parts of Asia.

Asia DTC revenue rose 8% on a reported basis and 11% organically during the quarter. However, European DTC revenue fell 2% as reported, while organic revenue declined 1%. E-commerce provided stronger momentum and increased 10% on both reported and organic bases.

In contrast, wholesale revenue increased 6% as all geographic segments posted growth during the quarter. Europe and Asia delivered particularly strong wholesale performance and helped offset weaker direct sales trends. Management expects DTC growth to improve during the fourth quarter as holiday demand strengthens.

Levi Strauss Raises Full-Year Profit Guidance

Levi Strauss posted net income from continuing operations of $169 million, compared with $122 million last year. Adjusted net income increased to $189 million from $136 million, reflecting higher revenue and stronger operating margins. Adjusted diluted earnings per share reached $0.48, up from $0.34 one year earlier.

The company raised full-year adjusted EPS guidance to between $1.54 and $1.56. Previous guidance called for adjusted earnings between $1.46 and $1.52 per share. Levi Strauss also expects organic revenue growth of about 6% and reported growth near 7%.

Levi Strauss plans another $100 million accelerated share repurchase under its existing authorization. The company also declared a $0.16 quarterly dividend, representing a 14% increase from last year. Still, the stock decline showed that slower DTC growth outweighed stronger margins and improved full-year profit expectations.

The post Levi Strauss & Co. (LEVI) Stock: Falls After Q3 Revenue Hits $1.6B and DTC Growth Disappoints  appeared first on Blockonomi.