Levi Strauss & Co. (LS&Co.)has reported its Q4 2021 results for the period ended 28 November 2021, which show its net revenues of US$1.7bn are up by almost a quarter (22%) compared to the same period in 2020 and up by 7% compared to the same period pre-pandemic (Q4 2019).
LS&Co. president and chief executive officer Chip Bergh believes the company’s strong brand equity has helped it to retain its pricing power and diversifying across product categories has led to its strong finish in 2021.
He said: “Today’s results reflect robust financial performance, marked by sequential improvement through the year, despite navigating ongoing business disruption from the pandemic. Through it all, we have stayed focused on our future and our momentum continues to accelerate into 2022.”
He added: “We are well positioned for long-term, sustainable growth – our strong brand equity is driving pricing power, we’re boldly diversifying our business and continuing to expand our high margin DTC business. As good as this past year has been, I am confident the future will be even better.”
LS&Co. Q4 2021 results
The direct to consumer net revenues were up by a quarter compared to Q4 2020 and up 20% compared to 2019, while the director to consumer e-commerce net venues were up 22% compared to Q4 2020 and up by 69% compared to Q4 2019.
LS&Co. company-operated store net revenues were up by over a quarter (28%) in Q4 2021 compared to Q4 2020 and up by 14% compared to Q4 2019.
The gross margin for Q4 2021 was 57.8% and adjusted gross margin was 58.1%, up 350 basis points from Q4 2020 and 380 basis points from Q4 2019. While, operating margin was 11.1% and adjusted EBIT margin expanded to 12%, up from 8.2% in Q4 2020 and 9.3% in Q4 2019.
The net income for the company was $153m with adjusted net income of $170m, up from $81m in Q4 2020 and $108m in Q4 2019.
LS&Co. full year 2021 results
- For the full year (FY 2021), Levi has reported net revenues of $5.8bn, which is up 29% compared to 2020 and flat compared to the last pre-pandemic year (2019).
- The gross margin was 58.1% and adjusted gross margin was 57.9% for FY 2021, up 350 basis points from FY 2020 and 410 basis points from FY 2019.
- The operating margin was 11.9%; Adjusted EBIT margin expanded to 12.4% , up from 4.1% in FY 2020 and 10.6% in FY 2019
- Net income was $554m with an adjusted net income of $601m, up from $84m in FY 2020 and $456m in FY 2019.
Global Data analyst comment on Levi’s results
Global Data’s apparel analyst Pippa Stevens explains that LS&Co. strong brand image and direct to consumer investments have bolstered its recovery.
She said: “LS&Co. strong brand identity and outperforming direct-to-consumer (DTC) channels, alongside the ongoing recovery of its key markets, enabled the brand to continue its impressive rebound from the pandemic in Q4 FY2020/21, with revenue rising by $299m on the year to reach $1.7bn — a 7.4% growth on a two-year basis. As a result, sales for FY2020/21 were level with FY2018/19, despite further COVID-19 disruption, and the brand now expects further growth of 11-13% in FY2021/22, highlighting the ongoing relevance of LS&Co. offering as the world emerges from the pandemic.
Its home region, the America’s, remained its strongest, with sales in Q4 FY2020/21 rising by 11.8% (constant currency) on a two-year comparative, followed by Europe, which grew by 2.8%, as consumer demand for denim returned in line with social events, and many traded up to premium styles. While Asia is still its weakest link, with the region’s sales for the quarter down 1.9% on a two-year basis, this was a huge improvement on the decline of 23.1% recorded in Q3, as COVID-19 restrictions were lifted in the region and physical stores reopened.”
She pointed out that while in Q3, LS&Co. DTC and wholesale segments were relatively on par on a two-year basis, it was quite a different story in Q4, with its DTC channels particularly bolstering its performance, up 20% on a two-year comparative, versus only 1% for wholesale.
She explained this reflects the trend seen across the wider apparel industry, in which consumers are increasingly preferring to shop directly through brands’ own websites and stores.
“This DTC growth was primarily driven by LS&Co.own digital platform, which grew by 69% compared to Q4 FY2018/19, with its proportion of total sales growing by 2ppts since Q3 to 8%. However, this is still relatively low compared to other players, suggesting that even more needs to be done to strengthen its online presence. To boost the channel, LS&Co. should make more of its collections exclusive to its website and introduce additional services such as customisation or personal shopping, to better mimic its instore offerings. Despite this, LS&Co. is wise to continue investing in its physical stores too, including the rollout of new experiential formats internationally, as the importance of fit for jeans means that many shoppers like to try them on before purchasing.”
Stephens highlighted that inflationary pressures from the global supply chain crisis and the price hikes of cotton forced LS&Co.to increase its prices and launch fewer promotions during FY2020/21, enabling its adjusted EBIT margin to grow 1.8ppts versus FY2018/19 to 12.4%.
“Its price increases do not seem to have deterred its shoppers, with its strong brand image and high-quality products boosting its pricing power. Its resilience has also been aided by its ongoing investments in sustainable innovations, including trials of a new eco-friendly denim dyeing system and its use of Circulose, a sustainably sourced viscose partly comprised of old jeans, as well as its partnerships with high-profile celebrities, such as its collection with Jaden Smith launched in December 2021, with these initiatives allowing it to differentiate itself from competitors.”