Costs associated with its initial public offering (IPO) earlier this year have weighed on second quarter earnings at US jeans giant Levi Strauss & Co.
Nevertheless, the company delivered what CEO Chip Bergh called “broad-based growth” across all brands, regions and key product categories in the second quarter, despite a challenging retail and macroeconomic environment.
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For the quarter ended 26 May, net revenues grew 5% on a reported basis to US$1.3bn from $1.2bn in the prior year quarter. On a constant-currency basis, net revenues were up by 9%.
In Europe, net revenues grew 9% on a reported basis and 18% on a constant-currency basis, while in the Americas, net revenues were up by 3% on a reported basis and 4% in constant-currency. In Asia, meanwhile, net revenues increased 6% on a reported basis and 12% on a constant-currency basis.
However, second quarter net income tumbled by $49m, or 63%, to $29m from $77m last year. Levi Strauss said the decline was primarily due to $29m of costs associated with the company’s initial public offering (IPO), including $25m of underwriting commissions paid on behalf of the selling stockholders.
The San Francisco based company also incurred higher advertising and promotion expenses during the quarter, with selling, general and administrative (SG&A) expenses rising to $638m from $594m a year earlier.
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By GlobalDataGross margin narrowed slightly to 53.3% from 53.9% in the same quarter of fiscal 2018, primarily due to 100 basis-points of unfavourable currency, which was partially offset by less discounted sales and the margin benefit from growth in the company’s global direct-to-consumer channel.
“Our second quarter and first half results reflect the continued strength of our diversified business model,” Bergh said, adding: “For both periods, the Levi’s brand grew in all three regions across men’s, women’s, tops and bottoms and maintained its position at the center of culture through iconic products and consumer experiences.”
The company did not adjust its annual guidance for fiscal 2019, and still expects net revenue growth at the high end of the mid-single digit range, and adjusted EBIT margin “slightly up in the range of 10 basis points.”
