Levi Strauss said net income for the Q1 period ending 26 February fell to US$115m compared to $196m for the same quarter a year earlier due to lower operating income stemming from lower gross margins and higher selling, general and administration expenses on the back of higher advertising and promotion expenses. Operating income was $157m versus $234m.
Net revenues, meanwhile, grew 6% to $1.7bn on a reported basis and 9% in constant currencies.
Specifically, DTC net revenues increased 12% on a reported basis and 16% on a constant-currency basis, driven by broad-based growth in both company-operated stores and e-commerce across all segments. Ecommerce increased 11% on a reported basis and 14% on a constant-currency basis. As a percentage of first-quarter company net revenues, sales from DTC stores and e-commerce comprised 33% and 9%, respectively, for a total of 42%. Wholesale net revenues increased 2% on a reported basis and 4% on a constant-currency basis, driven by strong growth in Asia and Canada and in the US.
Levi Strauss’ Asia business saw the highest growth during Q1 with net revenues up 12% on a reported basis and 22% on a constant-current basis.
In the Americas net revenues grew 7% on a reported and constant currency basis but in Europe net revenues fell 3% on a reported basis following the impact of the suspension in its Russia business and a retailer inventory rebalancing programme.
“Our first quarter results reflect the strength of our brands and the progress we are making against our strategic priorities,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co. “We delivered strong growth in our international business and record-breaking revenue performance in our direct-to-consumer channel. As we celebrate the 150th anniversary of the iconic 501® jean, we are deepening connections with consumers and cementing loyalty with the next generation of Levi’s® fans. This past quarter in the US, we were the market share leader among the key 18- to 30-year-old consumer, and we continued to grow share in our women’s denim bottoms business, further narrowing the gap to number one.”
Harmit Singh, chief financial and growth officer of Levi Strauss & Co, added: “On top of 26% constant currency growth a year ago, the company achieved solid results in the first quarter. Our teams also made significant progress reducing inventory levels, putting us in a stronger position as we move through the balance of the year. We are reaffirming our annual revenue and EPS guidance reflecting a cautious outlook on the macroenvironment though we remain excited about the momentum in our DTC and international businesses.”