Levi Strauss beat both earnings and revenue forecasts during the third quarter.
Shares of Levi Strauss are down more than 6% as of Wednesday afternoon, but things are actually looking up for the company. Levi Strauss released its third-quarter earnings this week, which showed steady progress for the company.
The company’s quarterly revenue came to $1.45 billion, which is up 3.8% from a year earlier. Adjusted earnings reached 31 cents per share, which is down more than 8% from a year earlier. However, both earnings and revenue beat Wall Street’s forecasts.
These gains were largely due to a few strategic improvements the company made during the third quarter. Here’s an overview of the third-quarter earnings report and what you can expect from Levi Strauss going forward.
Third-Quarter Wins and Losses
During the third quarter, the company focused on expanding its sales outside of its menswear line. This strategy seemed to work well, and the company saw its revenue from tops grow by 17%. The company’s women’s line and direct-to-consumer revenue both increased by 12%.
Levi Strauss also saw strong international growth during the most recent quarter. Sales in Europe grew by 18%, and sales in Asia increased by 12%. And internationally, the company saw growth across its wholesale and direct-to-consumer businesses.
However, the company’s domestic growth was noticeably less impressive. In the U.S., Levi Strauss saw its revenue fall by 3%. This was largely due to declines in the company’s wholesale business. Heading into the fourth quarter, management expects its sales in the U.S. to begin to pick up.
One of the biggest things that hurt Levi Strauss during the third quarter was reduced gross margins. The company’s gross margins fell 20 points year over year. The company maintained its full-year guidance.
Many analysts saw Levi Strauss as a risky investment when the company first went public last spring. And so far, the company has done little to prove naysayers wrong. Its most recent earnings are better than expected, but they still don’t present a compelling growth story for the company.
If Levi Strauss executives really want to turn things around, they’ll have to find a way to appeal to American consumers. Unfortunately, jeans have largely fallen out of favor with American consumers. Instead, most Americans prefer athletic leisurewear, which is why companies like Lululemon continue to report such strong growth.
Levi Strauss has done a good job of diversifying its business. But it’s unclear if this strategy will be enough to help the company do more than just tread water. It’s probably better to take a wait-and-see approach when it comes to the company.
Jamie Johnson is a Kansas City-based freelance writer who writes about finance and business. She covers a variety of personal finance topics including trading, investing, loans, and credit. Jamie’s work has been featured on InvestorPlace, GOBankingRates, Yahoo Finance, and Business Insider.