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Levi Strauss & Co. (LEVI) confirms the 2022 outlook, increases guidance

A sign is hung in front of Levi Strauss & Co. headquarters on April 9, 2021 in San Francisco, California.

Justin Sullivan | Getty Images News | Getty pictures

Levi Strauss & Co. on wednesday maintained the outlook for the full year and increased its financial targets over the next five years as the denim retailer grows 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 201[ads1]9.

“We confirm the guidance for the full year, despite all the headwinds,” CFO Harmit Singh said in an interview ahead of Levi’s annual investor day event. “The trends we see in the industry give us confidence,” Singh said. “We see in the short term, while not losing sight in the long term.”

In recent weeks, dealers from Walmart to Abercrombie & Fitch have alluded to the challenges they face, from ongoing supply chain problems and faulty inventories, to red-hot inflation and a potential decline in consumption spending.

Retailers have said that low-income customers already feel that they are getting higher prices on goods and adjusting budgets accordingly, while richer households are throwing out new outfits, makeup and luggage for summer travel. The division in behavior has resulted in a similar divide in retail. So far this earnings season, luxury and high-end brands – from Canada Goose to Michael Kors parent Capri Holdings – have largely outperformed companies targeting price-conscious consumers.

Levi does not expect that the volatile economic backdrop will reduce the demand for their jeans.

It now sees annual revenues grow in the range of 6% to 8%, up from previous targets of 4% to 6%, through 2027. If achieved, it will bring Levi’s revenues close to $ 10 billion in five years.

For the 2022 fiscal year, it still estimates that sales will increase between 11% and 13% from 2021 levels, with adjusted earnings per share falling within a range of $ 1.50 to $ 1.56. Analysts had expected earnings to rise by 11.8%, and Levi had an adjusted earnings per share of $ 1.55, according to Refinitiv data.

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

Levi’s direct business accounted for approximately 36% of total sales in the retailer’s last financial year, which ended on 28 November. Digital revenue, including from wholesale partners, accounted for 22% of total revenue of $ 5.8 billion that year, according to an annual filing.

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

In addition to growing online, Levi is also pushing customers to buy more than just the company’s iconic denim trousers. It aims to almost double revenues from peaks by 2027. Levi also estimates 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 higher gross margins than the company’s overall gross margins.

Levi expects that their Dockers and Beyond Yoga banners will contribute a total revenue of almost $ 1 billion by 2027. Levi bought Beyond Yoga, known for its leggings for women and stretchy tops, for an undisclosed amount last year.

The shares in Levi are down around 28% this year.

This story is evolving. Please check back for updates.

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