Earnings Results: Levi Strauss’s stock sinks as inventory ‘remains an overhang’ despite improvements

Levi’s called out 25 basis points of sequential improvement in inventory trends relative to the fourth quarter, “primarily attributable to deliberate actions taken during the quarter including reducing receipts and clearing inventory in the U.S.”

“We continue to expect sequential improvement quarter-over-quarter, with Q2 being substantially lower than Q1, and expect inventory levels to be in-line with sales growth by the end of the year,” the company said.

Stifel’s Duffy noted that Levi’s “[c]ommentary calling for inventory to align with sales by year-end is a shift from prior commentary for inventory to normalize by [the fiscal second quarter].”

The inventory problem has vexed apparel retailers of late, as it forces them to discount product.

Levi’s said Thursday it had net income of $115 million, or 29 cents a share, for its fiscal first quarter ending Feb. 26, down from $196 million, or 48 cents a share, in the year-earlier period. Adjusted earnings per share came to 34 cents, ahead of the 32-cent FactSet consensus.

Revenue rose 6% to $1.689 billion from $1.592 billion, also ahead of the $1.623 billion FactSet consensus.

“We are reaffirming our annual revenue and [earnings-per-share] guidance reflecting a cautious outlook on the macro-environment though we remain excited about the momentum in our [direct-to-consumer] and international businesses,” Chief Financial Officer Harmit Singh said in a statement.

The company still expects full-year adjusted EPS of $1.30 to $1.40 and revenue of $6.3 billion to $6.4 billion.

Levi’s shares, down 13.8% in Thursday morning action, are on track for their steepest single-day percentage decline since April 1, 2020, when they fell 14.3%.