Levi Strauss & Co. (LEVI) Reaffirms 2022 Forecast and Raises Forecast

Sign in front of Levi Strauss & Co. headquarters. April 9, 2021 in San Francisco, California.

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Levi Strauss & Co. Wednesday maintained its full-year guidance and raised its financial targets for the next five years as the denim retailer expands its e-commerce business.

The company sees itself as much stronger than it was before the Covid pandemic and since its debut on the public market in March 2019.

“We are reaffirming our full-year guidance despite all the headwinds,” Chief Financial Officer Harmeet Singh said in an interview ahead of the annual Levi’s Investor Day event. “The trends we see in business give us confidence,” Singh said. “We are looking at the short term, but we do not lose sight of the long term.”

In recent weeks, retailers from Walmart to Abercrombie & Fitch have cited the challenges they are facing, from current supply chain issues and inventory mismatches to sizzling inflation and potential cutbacks in consumer spending.

Retail executives said low-income shoppers are already feeling the pressure of higher product prices and are adjusting their budgets accordingly, while wealthier households are spending money on new clothes, cosmetics and luggage for summer travel. The division in behavior has led to a similar division in retail. So far this reporting season, luxury and high-end brands — from Canada Goose to Michael Kors parent company Capri Holdings — have largely outperformed companies that cater to price-conscious consumers.

Levi does not expect the unstable economic situation to affect demand for its jeans.

Now the company’s annual revenue will grow in the range of 6% to 8% compared to previous targets of 4-6% until 2027. If this is achieved, Levi’s will be close to $10 billion in revenue in five years.

For fiscal year 2022, the company continues to forecast sales growth of 11-13% over 2021 levels, with adjusted earnings per share in the range of $1.50 to $1.56. Analysts had expected revenue to rise 11.8% and Levi’s adjusted earnings per share was $1.55, according to Refinitiv data.

By 2027, Levi has said it aims to expand its consumer-facing business to 55% of total sales and triple its e-commerce revenue.

Levi’s direct business accounted for about 36% of the retailer’s total sales in its most recent fiscal year ending Nov. 28. Digital revenue, including from wholesale partners, accounted for 22% of total $5.8 billion in revenue that year, according to the annual report.

“As we continue to scale [e-commerce]this business is becoming much more profitable,” CEO Chip Berg said in an interview. “Before the pandemic, our e-commerce business was unprofitable.”

In addition to online growth, Levi is also encouraging shoppers to buy more than just the company’s iconic denim pants. By 2027, the company intends to almost double its revenue from tops. Levi also predicts that the women’s business, which currently accounts for about a third of sales, will double by then.

According to Singh, Levi’s women’s business has a higher gross margin than the company’s overall average gross margin.

Levi expects its Dockers and Beyond Yoga banners to generate nearly $1 billion in combined revenue by 2027. Last year, Levi acquired Beyond Yoga, known for women’s leggings and stretchy tops, for an undisclosed amount.

Levi shares are down about 28% this year.

This story is evolving. Please stay tuned for updates.

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