Levi Strauss & Co. announced financial results for the first quarter ended 23rd February, 2020 with a net revenue growth of five percent.
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Due to the timing of the company’s fiscal year end, the company’s first fiscal quarter of 2020 included the benefit of the calendar 2019 Black Friday week. However, the mid-quarter outbreak of COVID-19 adversely impacted the company’s first quarter net revenues in Asia by an estimated $20 million.
“Our first quarter results underscore the strength of the Levi’s brand and the efficacy of our strategies to diversify our business, both of which will be crucial to coming out of the current crisis stronger than ever,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co.
“The Levi’s brand has never been stronger, our balance sheet is solid… Significant gross margin expansion, lower inventory and higher earnings all contributed to strong financial performance in the first quarter of 2020,” said Harmit Singh, executive vice president and chief financial officer of Levi Strauss & Co.
Net revenues grew five percent on a reported basis, and six percent on a constant-currency basis excluding $11 million in unfavorable currency effects. Net revenues growth was partially offset by an estimated approximate $20 million adverse impact of store closures and reduced traffic during the last six weeks of the first quarter resulting from the outbreak of COVID-19 in China.
Asia’s operating income declined 24 percent on both a reported and constant-currency basis.Operating income for the Americas was flat on both a reported and constant-currency basis, as the higher net revenues were offset primarily by the earlier timing of advertising spend. Europe’s operating income grew nine percent on a reported basis and 12 percent on a constant-currency basis, in line with revenue growth.
The company’s direct-to-consumer net revenues grew by 13 percent on a constant-currency basis in the first quarter, with Black Friday in the current year benefiting the year-over-year direct-to-consumer net revenues growth comparison by about seven percentage points, and total company revenues by three percentage points.
The remainder of the direct to-consumer growth was due to expansion and performance of the retail network and e-commerce growth. Net revenues from the company’s wholesale business grew one percent on a constant-currency basis, reflecting growth in Europe and Asia partially offset by a decline in the Americas.
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Gross profit of $839 million rose seven percent on a reported basis from $783 million in the same quarter in the prior year. Gross margin was 55.7 percent of net revenues, up 110 basis-points compared with 54.6 percent in the same quarter of 2019, primarily reflecting the benefit of price increases, higher direct-to consumer and international sales, including the benefit of Black Friday falling in the 2020 period, and a reduction in sales to the off-price channel.