Q1 Earnings Results Above Expectations
Gross Margin of 58.2% Up 240 BPS Over Prior Year Driven by Lower
Product Costs & Favorable Mix Shift Global DTC Up 7%
Including 10% Growth in the U.S. Diluted Loss Per Share of
$(0.03) Due to Restructuring Charges, Adjusted Diluted EPS of
$0.26 Company Affirms 1-3% FY Revenue Growth & Raises
EPS Range to $1.17-$1.27
Levi Strauss & Co. (NYSE: LEVI) today announced financial
results for the first quarter ended February 25, 2024.
“We started the year strong delivering results above
expectations, underscoring the power of the Levi’s brand and the
progress we are making on our strategic priorities. Both newness
and strength in our core offerings are fueling consumer demand and
driving meaningful market share gains,” said Michelle Gass,
President and CEO of Levi Strauss & Co. “The momentum in
our global DTC business continues, with DTC up in all segments. Our
efforts to stabilize our wholesale business are delivering results.
We are on our way to transforming this company into a best-in-class
DTC-first apparel retailer, setting the stage for our next phase of
sustainable profitable growth.”
“The structural economics of our business improved in Q1 driven
by significant gross margin expansion, disciplined expense controls
and efficient working capital management,” said Harmit Singh,
Chief Financial and Growth Officer of Levi Strauss & Co.
“Our global productivity initiative, Project Fuel, is progressing
well and improving the profitability of the company. Looking
forward, we are encouraged by trends in our business, around the
world, including in Europe. As a result, we are confident in our
ability to return the topline to mid-single-digit growth in the
second half of this year and are increasing our full year EPS
expectations.”
Financial Highlights
- Net Revenues of $1.6 billion were 8% lower on both a
reported and constant-currency basis versus Q1 2023 primarily due
to the shift in wholesale shipments from Q2 to Q1 2023 from the
U.S. ERP implementation. This shift negatively impacted Q1 2024
over 2023 by approximately $100 million or 6% of net revenues. In
addition, excluding the impact of the exit of the Denizen business
and Russia, net revenues would have been flat to prior year.
- In the Americas, net revenues decreased 11% on a
reported and constant-currency basis. Adjusting for the shift in
wholesale shipments and the exit of the Denizen business, both the
Americas and the U.S. were up 2%.
- In Europe, net revenues decreased 7% on a reported basis
and 8% on a constant-currency basis; factoring out the impact of
the Russia business, net revenues decreased 5% on a
constant-currency basis.
- Asia net revenues were in line with prior year on a
reported basis and up 5% on a constant-currency basis, on top of
22% growth in the prior year, reflecting growth across most
markets.
- Other Brands net revenues decreased 10% on both a
reported and constant-currency basis.
- DTC (Direct to Consumer) net revenues increased 7% on a
reported basis and 8% on a constant-currency basis. DTC growth
exceeded total net revenues growth in all segments, including a 10%
increase in the U.S. and a 4% increase in Europe, excluding Russia.
Revenues from e-commerce grew 13% on a reported basis and 12% on a
constant-currency basis reflecting double-digit growth across the
Levi’s and Beyond Yoga brands. As a percentage of first quarter net
revenues, DTC comprised a record 48% of total net revenues.
- Wholesale net revenues declined 18% on a reported basis
and 19% on a constant-currency basis driven primarily by the $100
million negative shift in wholesale shipments from the U.S. ERP
implementation from Q2 to Q1 2023. Global wholesale net revenues
were down 9% to prior year when normalizing for the shift in
wholesale shipments in Q1 2023.
Net Revenues
Operating Income (loss)
Three Months Ended
% Increase (Decrease)
Three Months Ended
% Increase (Decrease)
($ millions)
February 25, 2024
February 26, 2023
As
Reported
Constant
Currency
February 25, 2024
February 26, 2023
As
Reported
Constant
Currency
Americas
$
736
$
823
(11
)%
(11
)%
$
133
$
135
(2
)%
(3
)%
Europe
$
423
$
455
(7
)%
(8
)%
$
104
$
117
(12
)%
(12
)%
Asia
$
289
$
290
—
%
5
%
$
48
$
54
(10
)%
(4
)%
Other Brands
$
109
$
121
(10
)%
(10
)%
$
(2
)
$
3
(162
)%
(157
)%
- Operating margin of (0.03)% was down from 9.3% in Q1
2023 as a result the restructuring charges taken in the current
quarter related to our cost savings initiative, Project Fuel.
Adjusted EBIT margin declined 200 basis points to 9.0% from
11.0% last year on a reported basis due to lower net revenues.
- Gross margin was up 240 basis points to 58.2% from 55.8%
in Q1 2023 primarily due to lower product costs and favorable mix
shift.
- Selling, general and administrative (SG&A) expenses
were $791 million compared to $774 million in Q1 2023. Adjusted
SG&A was $766 million compared to $757 million last
year.
- Restructuring charges were $116 million related to
Project Fuel consisting primarily of severance and post-employment
benefit charges.
- Interest and other expenses, net, which include foreign
exchange losses, were $12 million in the aggregate compared to $18
million in Q1 2023.
- The effective income tax rate was 16.4% compared to
17.6% in Q1 2023.
- Net loss was $11 million compared to net income of $115
million in Q1 2023. Adjusted net income was $103 million
compared to $135 million in Q1 2023.
- Diluted loss per share was $(0.03) compared to diluted
earnings per share of $0.29 in Q1 2023. Adjusted diluted
earnings per share was $0.26 compared to $0.34 in Q1 2023.
Three Months Ended
Increase
(Decrease)
As Reported
Increase (Decrease)
Constant
Currency
($ millions, except per-share amounts)
February 25, 2024
February 26, 2023
Net revenues
$
1,558
$
1,689
(8
)%
(8
)%
Net (loss) income
$
(11
)
$
115
(109
)%
(109
)%
Adjusted net income
$
103
$
135
(24
)%
(23
)%
Adjusted EBIT
$
141
$
185
(24
)%
(23
)%
Diluted (loss) earnings per share
$
(0.03
)
$
0.29
(32
)¢
(32
)¢
Adjusted diluted earnings per share
$
0.26
$
0.34
(8
)¢
(7
)¢
Additional information regarding Adjusted SG&A, Adjusted
EBIT, Adjusted EBIT margin, Adjusted net income, Adjusted diluted
earnings per share, as well as amounts presented on a
constant-currency basis, all of which are non-GAAP financial
measures, is provided at the end of this press release.
Balance Sheet Review as of February 25, 2024
- Cash and cash equivalents were $517 million, while total
liquidity was approximately $1.5 billion.
- Total inventories decreased 14% on a dollar basis and
21% excluding the impact of the modification of terms with the
majority of our suppliers that results in the company taking
ownership of inventory for goods being brought into the Americas
closer to the point of shipment rather than destination.
Additional information regarding leverage ratio, which is a
non-GAAP financial measure, is provided at the end of this press
release.
Shareholder Returns
The company returned approximately $73 million to
shareholders in the first quarter, including:
- Dividends of $48 million, representing a dividend of $0.12 per
share.
- Share repurchases of $25 million, reflecting 1.5 million shares
retired.
As of February 25, 2024, the company had $656 million
remaining under its current share repurchase authorization, which
has no expiration date.
The company has declared a dividend of $0.12 per share, totaling
approximately $48 million. The dividend is payable in cash on May
23, 2024 to the holders of record of Class A common stock and Class
B common stock at the close of business on May 9, 2024.
Updated Fiscal 2024 Guidance
- Company reaffirms reported net revenues are expected to be up
1% to 3% year-over-year.
- Adjusted diluted EPS is now expected to be between $1.17 to
$1.27 vs. $1.15 to $1.25 previously.
- More details will be provided during the earnings conference
call.
This outlook also assumes no significant worsening of
macro-economic pressures on the consumer, inflationary pressures,
supply chain disruptions, or currency impacts. A reconciliation of
non-GAAP forward looking information to the corresponding GAAP
measures cannot be provided without unreasonable efforts due to the
challenge in quantifying various items including but not limited
to, the effects of foreign currency fluctuations, taxes, and any
future restructuring, restructuring-related, severance and other
charges.
Investor Conference Call
To access the conference call, please pre-register on
https://register.vevent.com/register/BIa7581815e23849aeb508219047dcf7de
and you will receive confirmation with dial-in details. A live
webcast of the event can be accessed on
https://edge.media-server.com/mmc/p/z6wcpcit/.
A replay of the webcast will be available on
http://investors.levistrauss.com starting approximately two hours
after the event and archived on the site for one quarter.
About Levi Strauss & Co.
Levi Strauss & Co. is one of the world's largest brand-name
apparel companies and a global leader in jeanswear. The company
designs and markets jeans, casual wear and related accessories for
men, women and children under the Levi's®, Dockers®, Signature by
Levi Strauss & Co.™, Denizen® and Beyond Yoga® brands. Its
products are sold in more than 110 countries worldwide through a
combination of chain retailers, department stores, online sites,
and a global footprint of approximately 3,200 brand-dedicated
stores and shop-in-shops. Levi Strauss & Co.'s reported 2023
net revenues were $6.2 billion. For more information, go to
http://levistrauss.com, and for financial news and announcements go
to http://investors.levistrauss.com.
Forward Looking Statements
This press release and related conference call contain, in
addition to historical information, forward-looking statements,
including statements related to: future financial results,
including the company's expectations for the full fiscal year 2024
net revenues, adjusted diluted earnings per share and effective tax
rate; the ongoing restructuring of our operations and our ability
to achieve any anticipated cost savings associated with such
restructuring; inflationary pressures; fluctuations in foreign
currency exchange rates; global economic conditions; supply chain
constraints and disruptions; future dividend payments; future share
repurchases; performance of our wholesale and DTC businesses;
future inventory levels and our ability to execute against our
long-term business strategies. The company has based these
forward-looking statements on its current assumptions, expectations
and projections about future events. Words such as, but not limited
to, “believe,” “will,” “so we can,” “when,” “anticipate,” “intend,”
“estimate,” “expect,” “project” and similar expressions are used to
identify forward-looking statements, although not all
forward-looking statements contain these words. These
forward-looking statements are necessarily estimates reflecting the
best judgment of senior management and involve a number of risks
and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements.
Investors should consider the information contained in the
company's filings with the U.S. Securities and Exchange Commission
(SEC), including its Annual Report on Form 10-K for fiscal year
2023 and its Quarterly Reports on Form 10-Q for the quarter ended
February 25, 2024, especially in the “Management's Discussion and
Analysis of Financial Condition and Results of Operations” and
“Risk Factors” sections. Other unknown or unpredictable factors
also could have material adverse effects on future results,
performance or achievements. In light of these risks,
uncertainties, assumptions and factors, the forward-looking events
discussed in this press release and related conference call may not
occur. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date stated
or, if no date is stated, as of the date of this press release and
related conference call. The company is not under any obligation
and does not intend to update or revise any of the forward-looking
statements contained in this press release and related conference
call to reflect circumstances existing after the date of this press
release and related conference call or to reflect the occurrence of
future events, even if such circumstances or future events make it
clear that any expected results expressed or implied by those
forward-looking statements will not be realized.
Non-GAAP Financial Measures
The company reports its financial results in accordance with
generally accepted accounting principles in the United States
(GAAP) and the rules of the SEC. To supplement its financial
statements prepared and presented in accordance with GAAP, the
company uses certain non-GAAP financial measures, such as Adjusted
SG&A, Adjusted SG&A margin, Adjusted EBIT (both reported
and on a constant-currency basis), Adjusted EBIT margin (both
reported and on a constant-currency basis), Adjusted EBITDA,
Adjusted net income (both reported and on a constant-currency
basis), Adjusted net income margin, Adjusted diluted earnings per
share (both reported and on a constant-currency basis) and
constant-currency net revenues, Adjusted free cash flow and return
on invested capital to provide investors with additional useful
information about its financial performance, to enhance the overall
understanding of its past performance and future prospects and to
allow for greater transparency with respect to important metrics
used by management for financial and operating decision-making. The
company presents these non-GAAP financial measures to assist
investors in seeing its financial performance from management's
view and because it believes they provide an additional tool for
investors to use in computing the company's core financial
performance over multiple periods with other companies in its
industry. The tables found below present Adjusted SG&A,
Adjusted SG&A margin, Adjusted EBIT (both reported and on a
constant-currency basis), Adjusted EBIT margin (both reported and
on a constant-currency basis), Adjusted EBITDA, Adjusted net income
(both reported and on a constant-currency basis), Adjusted net
income margin (both reported and on a constant-currency basis),
Adjusted diluted earnings per share (both reported and on a
constant-currency basis) and constant-currency net revenues,
Adjusted free cash flow, and return on invested capital, and
corresponding reconciliations of these non-GAAP financial measures
to the most directly comparable financial measures calculated in
accordance with GAAP. Non-GAAP financial measures have limitations
in their usefulness to investors because they have no standardized
meaning prescribed by GAAP and are not prepared under any
comprehensive set of accounting rules or principles. Certain items
that may be excluded or included in non-GAAP financial measures may
be significant items that could impact the company’s financial
position, results of operations and cash flows and should therefore
be considered in assessing the company’s actual financial condition
and performance. Non-GAAP financial measures are subject to
inherent limitations as they reflect the exercise of judgment by
management in determining how they are formulated. Some specific
limitations include but are not limited to, the fact that such
non-GAAP financial measures: (a) do not reflect cash outlays for
capital expenditures, contractual commitments or liabilities
including pension obligations, post-retirement health benefit
obligations and income tax liabilities; (b) do not reflect changes
in, or cash requirements for, working capital requirements; and (c)
do not reflect the interest expense, or the cash requirements
necessary to service interest or principal payments, on
indebtedness. In addition, non-GAAP financial measures may be
calculated differently from, and therefore may not be directly
comparable to, similarly titled measures used by other companies.
As a result, non-GAAP financial measures should be viewed as
supplementing, and not as an alternative or substitute for, the
company's financial results prepared in accordance with GAAP. The
company urges investors to review the reconciliation of these
non-GAAP financial measures to the most directly comparable GAAP
financial measures included in this press release, and not to rely
on any single financial measure to evaluate its business. See
“RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES” below for
reconciliation to the most comparable GAAP financial measures. A
reconciliation of non-GAAP forward looking information to the
corresponding GAAP measures cannot be provided without unreasonable
efforts due to the challenge in quantifying various items including
but not limited to, the effects of foreign currency fluctuations,
taxes, and any future restructuring, restructuring-related,
severance and other charges.
Constant-currency
The company reports certain operating results on a
constant-currency basis in order to facilitate period-to-period
comparisons of its results without regard to the impact of
fluctuating foreign currency exchange rates. The term foreign
currency exchange rates refers to the exchange rates used to
translate the company's operating results for all countries where
the functional currency is not the U.S. Dollar into U.S. Dollars.
Because the company is a global company, foreign currency exchange
rates used for translation may have a significant effect on its
reported results. In general, the company's financial results are
affected positively by a weaker U.S. Dollar and are affected
negatively by a stronger U.S. Dollar as compared to the foreign
currencies in which it conducts its business. References to
operating results on a constant-currency basis mean operating
results without the impact of foreign currency exchange rate
fluctuations.
The company believes disclosure of constant-currency results is
helpful to investors because it facilitates period-to-period
comparisons of its results by increasing the transparency of the
underlying performance by excluding the impact of fluctuating
foreign currency exchange rates. However, constant-currency results
are non-GAAP financial measures and are not meant to be considered
as an alternative or substitute for comparable measures prepared in
accordance with GAAP. Constant-currency results have no
standardized meaning prescribed by GAAP, are not prepared under any
comprehensive set of accounting rules or principles and should be
read in conjunction with the company's consolidated financial
statements prepared in accordance with GAAP. Constant-currency
results have limitations in their usefulness to investors and may
be calculated differently from, and therefore may not be directly
comparable to, similarly titled measures used by other
companies.
The company calculates constant-currency amounts by translating
local currency amounts in the prior-year period at actual foreign
exchange rates for the current period. Constant-currency results do
not eliminate the transaction currency impact, which primarily
include the realized and unrealized gains and losses recognized
from the measurement and remeasurement of purchases and sales of
products in a currency other than the functional currency.
Additionally, gross margin is impacted by gains and losses related
to the procurement of inventory, primarily products sourced in EUR
and USD, by the company's global sourcing organization on behalf of
its foreign subsidiaries.
Source: Levi Strauss & Co. Investor Relations
LEVI STRAUSS & CO. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
February 25,
2024
November 26,
2023
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents
$
516.7
$
398.8
Trade receivables, net
661.6
752.7
Inventories
1,150.4
1,290.1
Other current assets
196.1
196.0
Total current assets
2,524.8
2,637.6
Property, plant and equipment, net
673.8
680.7
Goodwill
296.1
303.7
Other intangible assets, net
266.2
267.6
Deferred tax assets, net
761.7
729.5
Operating lease right-of-use assets,
net
1,021.5
1,033.9
Other non-current assets
417.4
400.6
Total assets
$
5,961.5
$
6,053.6
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable
497.6
567.9
Accrued salaries, wages and employee
benefits
180.9
214.9
Accrued sales returns and allowances
172.5
189.8
Short-term operating lease liabilities
245.6
245.5
Other accrued liabilities
673.8
569.4
Total current liabilities
1,770.4
1,787.5
Long-term debt
1,006.0
1,009.4
Long-term operating lease liabilities
897.8
913.1
Long-term employee related benefits and
other liabilities
311.2
297.2
Total liabilities
3,985.4
4,007.2
Commitments and contingencies
Stockholders’ Equity:
Common stock — $0.001 par value;
1,200,000,000 Class A shares authorized, 102,412,794 shares and
102,104,670 shares issued and outstanding as of February 25, 2024
and November 26, 2023, respectively; and 422,000,000 Class B shares
authorized, 295,616,438 shares and 295,243,353 shares issued and
outstanding, as of February 25, 2024 and November 26, 2023,
respectively
0.4
0.4
Additional paid-in capital
692.3
686.7
Accumulated other comprehensive loss
(383.3
)
(390.9
)
Retained earnings
1,666.7
1,750.2
Total stockholders’ equity
1,976.1
2,046.4
Total liabilities and stockholders’
equity
$
5,961.5
$
6,053.6
The notes accompanying the consolidated
financial statements in the company's Form 10-Q for the first
quarter of fiscal 2024 are an integral part of these consolidated
financial statements.
LEVI STRAUSS & CO. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended
February 25,
2024
February 26,
2023
(Dollars in millions, except
per share amounts)
(Unaudited)
Net revenues
$
1,557.6
$
1,688.9
Cost of goods sold
651.1
746.6
Gross profit
906.5
942.3
Selling, general and administrative
expenses
790.7
773.5
Restructuring charges, net
116.2
11.4
Operating (loss) income
(0.4
)
157.4
Interest expense
(10.0
)
(10.7
)
Other expense, net
(2.3
)
(7.5
)
(Loss) income before income taxes
(12.7
)
139.2
Income tax (benefit) expense
(2.1
)
24.5
Net (loss) income
$
(10.6
)
$
114.7
(Loss) earnings per common share
attributable to common stockholders:
Basic
$
(0.03
)
$
0.29
Diluted
$
(0.03
)
$
0.29
Weighted-average common shares
outstanding:
Basic
398,941,172
395,956,182
Diluted
398,941,172
400,360,529
The notes accompanying the consolidated
financial statements in the company's Form 10-Q for the first
quarter of fiscal 2024 are an integral part of these consolidated
financial statements.
LEVI STRAUSS & CO. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
Three Months Ended
February 25,
2024
February 26,
2023
(Dollars in millions)
(Unaudited)
Cash Flows from Operating
Activities:
Net (loss) income
$
(10.6
)
$
114.7
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization
44.6
39.6
Goodwill impairment
5.5
—
Property, plant, equipment impairment, and
early lease terminations, net
—
14.9
Stock-based compensation
18.7
17.6
Deferred income taxes
(32.7
)
(7.9
)
Other, net
3.4
(2.8
)
Net change in operating assets and
liabilities
257.1
(336.9
)
Net cash provided by (used for) operating
activities
286.0
(160.8
)
Cash Flows from Investing
Activities:
Purchases of property, plant and
equipment
(71.6
)
(110.9
)
Proceeds on settlement of forward foreign
exchange contracts not designated for hedge accounting, net
0.8
21.0
Proceeds from sale, maturity and
collection of short-term investments
—
70.8
Other investing, net
(0.9
)
—
Net cash used for investing activities
(71.7
)
(19.1
)
Cash Flows from Financing
Activities:
Proceeds from senior revolving credit
facility
—
150.0
Repurchase of common stock
(25.0
)
(8.1
)
Tax withholdings on equity awards
(15.3
)
(18.6
)
Dividends to stockholders
(47.9
)
(47.6
)
Other financing activities, net
(6.3
)
2.1
Net cash (used for) provided by financing
activities
(94.5
)
77.8
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
(1.9
)
(5.7
)
Net increase (decrease) in cash and cash
equivalents and restricted cash
117.9
(107.8
)
Beginning cash and cash equivalents
398.8
429.6
Ending cash and cash
equivalents
$
516.7
$
321.8
Noncash Investing Activity:
Property, plant and equipment acquired and
not yet paid at end of period
$
26.3
$
39.3
Supplemental disclosure of cash flow
information:
Cash paid for income taxes during the
period, net of refunds
17.4
1.7
The notes accompanying the consolidated
financial statements in the company's Form 10-Q for the first
quarter of fiscal 2024 are an integral part of these consolidated
financial statements.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES FOR THE FIRST QUARTER OF 2024
The following information relates to non-GAAP financial
measures, and should be read in conjunction with the investor call
held on April 3, 2024, discussing the company’s financial condition
and results of operations as of and for the quarter and year ended
February 25, 2024.
We define the following non-GAAP measures as follows:
Most comparable GAAP measure
Non-GAAP measure
Non-GAAP measure definition
Selling, general and administration
(“SG&A”) expenses
Adjusted SG&A
SG&A expenses excluding acquisition
and integration related charges, property, plant, and equipment,
right-of-use asset impairment, and early lease terminations, net
and restructuring related charges, severance and other, net
SG&A margin
Adjusted SG&A margin
Adjusted SG&A as a percentage of net
revenues
Net (loss) income
Adjusted EBIT
Net (loss) income excluding income tax
(benefit) expense, interest expense, other expense (income), net,
acquisition and integration related charges, property, plant,
equipment, right-of-use asset impairment and early lease
terminations, net, goodwill and other intangible asset impairment
charges, and restructuring and restructuring related charges,
severance and other, net
Net (loss) income margin
Adjusted EBIT margin
Adjusted EBIT as a percentage of net
revenues
Net (loss) income
Adjusted EBITDA
Adjusted EBIT excluding depreciation and
amortization expense
Net (loss) income
Adjusted net income
Net (loss) income excluding acquisition
and integration related charges, property, plant, equipment,
right-of-use asset impairment charges and early lease terminations,
net, goodwill and other intangible asset impairment charges,
restructuring and restructuring related charges, severance and
other, net, adjusted to give effect to the income tax impact of
such adjustments.
Net (loss) income margin
Adjusted net income margin
Adjusted net income as a percentage of net
revenues
Diluted (loss) earnings per share
Adjusted diluted earnings per share
Adjusted net (loss) income per
weighted-average number of diluted common shares outstanding
Adjusted SG&A:
Three Months Ended
February 25,
2024
February 26,
2023
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Selling, general and administrative
expenses
$
790.7
$
773.5
Non-GAAP measure:
Selling, general and administrative
expenses
$
790.7
$
773.5
Acquisition and integration related
charges(1)
(4.0
)
(1.3
)
Property, plant, equipment, right-of-use
asset impairment, and early lease terminations, net(2)
—
(14.7
)
Goodwill and other intangible asset
impairment charges(3)
(5.5
)
—
Restructuring related charges, severance
and other, net(4)
(15.4
)
(0.5
)
Adjusted SG&A
$
765.8
$
757.0
SG&A margin
50.8
%
45.8
%
Adjusted SG&A margin
49.2
%
44.8
%
_____________
(1)
Acquisition and integration related
charges includes acquisition-related compensation subject to the
continued employment of certain Beyond Yoga® employees. In the
first quarter of 2024, their employment ceased, resulting in the
acceleration of the remaining compensation.
(2)
For the three-month period ended February
26, 2023, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net includes $18.2
million in charges related to the impairment of capitalized
internal-use software, as a result of the decision to discontinue
certain technology projects, net of a $3.5 million gain on the
early termination of store leases related to the Russia-Ukraine
crisis.
(3)
For the three-month period ended February
25, 2024, goodwill and other intangible asset impairment charges
includes the recognition of a $5.5 million goodwill impairment
charge related our footwear business.
(4)
For the three-month period ended February
25, 2024, restructuring related charges, severance, and other, net
primarily relates to consulting costs associated with our
restructuring initiative of $10.1 million, other executive
separation charges and legal settlements of $3.7 million and
transaction and deal related costs of $1.0 million.
Adjusted EBIT and Adjusted EBITDA:
The following table presents a reconciliation of net income, the
most directly comparable financial measure calculated in accordance
with GAAP, to Adjusted EBIT and Adjusted EBITDA for each of the
periods presented.
Three Months Ended
Twelve Months Ended
February 25,
2024
February 26,
2023
February 25,
2024
February 26,
2023
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Net (loss) income
$
(10.6
)
$
114.7
$
124.3
$
488.0
Non-GAAP measure:
Net (loss) income
$
(10.6
)
$
114.7
$
124.3
$
488.0
Income tax (benefit) expense
(2.1
)
24.5
(11.0
)
54.9
Interest expense
10.0
10.7
45.2
32.2
Other expense (income), net
2.3
7.5
37.0
(5.4
)
Acquisition and integration related
charges(1)
4.0
1.3
7.7
5.2
Property, plant, equipment, right-of-use
asset impairment and early lease terminations, net(2)
—
14.7
48.7
39.7
Goodwill and other intangible asset
impairment charges(3)
5.5
—
95.7
11.6
Restructuring and restructuring related
charges, severance and other, net(4)
131.6
11.9
162.6
34.2
Adjusted EBIT
$
140.7
$
185.3
$
510.2
$
660.4
Depreciation and amortization
43.5
38.4
165.9
155.1
Adjusted EBITDA
$
184.2
$
223.7
$
676.1
$
815.5
Net (loss) income margin
(0.7
)%
6.8
%
Adjusted EBIT margin
9.0
%
11.0
%
_____________
(1)
Acquisition and integration related
charges includes acquisition-related compensation subject to the
continued employment of certain Beyond Yoga® employees. In the
first quarter of 2024, their employment ceased, resulting in the
acceleration of the remaining compensation.
(2)
For the three-month period ended February
26, 2023, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net includes $18.2
million in charges related to the impairment of capitalized
internal-use software, as a result of the decision to discontinue
certain technology projects, net of a $3.5 million gain on the
early termination of store leases related to the Russia-Ukraine
crisis.
(3)
For the three-month period ended February
25, 2024, goodwill and other intangible asset impairment charges
includes the recognition of a $5.5 million goodwill impairment
charge related our footwear business.
(4)
For the three-month period ended February
25, 2024, restructuring and restructuring related charges,
severance, and other, net primarily includes net restructuring
charges of $116.2 million related to Project Fuel, consulting costs
associated with our restructuring initiative of $10.1 million,
other executive separation charges and legal settlements of $3.7
million and transaction and deal related costs of $1.0 million.
For the three-month period ended February
26, 2023, restructuring and restructuring related charges,
severance and other, net includes net restructuring charges of
$11.4 million recognized in connection with the 2022 restructuring
initiative.
Adjusted Net Income:
Three Months Ended
Twelve Months Ended
February 25,
2024
February 26,
2023
February 25,
2024
February 26,
2023
(Dollars in millions, except
per share amounts)
(Unaudited)
Most comparable GAAP measure:
Net (loss) income
$
(10.6
)
$
114.7
$
124.3
$
488.0
Non-GAAP measure:
Net (loss) income
$
(10.6
)
$
114.7
$
124.3
$
488.0
Acquisition and integration related
charges(1)
4.0
1.3
7.7
5.2
Property, plant, equipment, right-of-use
asset impairment and early lease terminations, net(2)
—
14.7
48.7
39.7
Goodwill and other intangible asset
impairment charges(3)
5.5
—
95.7
11.6
Restructuring and restructuring related
charges, severance and other, net(4)
131.6
11.9
162.6
34.2
Pension settlement loss
—
—
19.0
—
Unrealized gains on marketable
securities
—
—
—
(19.9
)
Tax impact of adjustments(5)
(27.8
)
(7.7
)
(49.5
)
(9.2
)
Adjusted net income
$
102.7
$
134.9
$
408.5
$
549.6
Net (loss) income margin
(0.7
)%
6.8
%
Adjusted net income margin
6.6
%
8.0
%
_____________
(1)
Acquisition and integration related
charges includes acquisition-related compensation subject to the
continued employment of certain Beyond Yoga® employees. In the
first quarter of 2024, their employment ceased, resulting in the
acceleration of the remaining compensation.
(2)
For the three-month period ended February
26, 2023, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net includes $18.2
million in charges related to the impairment of capitalized
internal-use software, as a result of the decision to discontinue
certain technology projects, net of a $3.5 million gain on the
early termination of store leases related to the Russia-Ukraine
crisis.
(3)
For the three-month period ended February
25, 2024, goodwill and other intangible asset impairment charges
includes the recognition of a $5.5 million goodwill impairment
charge related our footwear business.
(4)
For the three-month period ended February
25, 2024, restructuring and restructuring related charges,
severance, and other, net primarily includes net restructuring
charges of $116.2 million related to Project Fuel, consulting costs
associated with our restructuring initiative of $10.1 million,
other executive separation charges and legal settlements of $3.7
million and transaction and deal related costs of $1.0 million.
For the three-month period ended February
26, 2023, restructuring and restructuring related charges,
severance and other, net includes net restructuring charges of
$11.4 million recognized in connection with the 2022 restructuring
initiative.
(5)
Tax impact calculated using the annual
effective tax rate, excluding discrete costs and benefits.
Adjusted Diluted Earnings per Share:
Three Months Ended
February 25,
2024
February 26,
2023
(Unaudited)
Most comparable GAAP measure:
Diluted (loss) earnings per share(1)
$
(0.03
)
$
0.29
Non-GAAP measure:
Diluted (loss) earnings per share
$
(0.03
)
$
0.29
Acquisition and integration related
charges(2)
0.01
—
Property, plant, equipment, right-of-use
asset impairment and early lease terminations, net(3)
—
0.04
Goodwill and other intangible asset
impairment charges(4)
0.02
—
Restructuring and restructuring related
charges, severance and other, net(5)
0.33
0.03
Tax impact of adjustments(6)
(0.07
)
(0.02
)
Adjusted diluted earnings per
share(1)
$
0.26
$
0.34
_____________
(1)
For the three-month period ending February
25, 2024, 398.9 million shares were used in the calculation of
diluted loss per share and 402.6 million were used in the
calculation of adjusted diluted earnings per share. The dilutive
effect of stock awards of 3.6 million were not included in the
calculation of diluted loss per share as the inclusion of these
securities would have been anti-dilutive.
(2)
Acquisition and integration related
charges includes acquisition-related compensation subject to the
continued employment of certain Beyond Yoga® employees. In the
first quarter of 2024, their employment ceased, resulting in the
acceleration of the remaining compensation.
(3)
For the three-month period ended February
26, 2023, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net includes $18.2
million in charges related to the impairment of capitalized
internal-use software, as a result of the decision to discontinue
certain technology projects, net of a $3.5 million gain on the
early termination of store leases related to the Russia-Ukraine
crisis.
(4)
For the three-month period ended February
25, 2024, goodwill and other intangible asset impairment charges
includes the recognition of a $5.5 million goodwill impairment
charge related our footwear business.
(5)
For the three-month period ended February
25, 2024, restructuring and restructuring related charges,
severance, and other, net primarily includes net restructuring
charges of $116.2 million related to Project Fuel, consulting costs
associated with our restructuring initiative of $10.1 million,
other executive separation charges and legal settlements of $3.7
million and transaction and deal related costs of $1.0 million.
For the three-month period ended February
26, 2023, restructuring and restructuring related charges,
severance and other, net includes net restructuring charges of
$11.4 million recognized in connection with the 2022 restructuring
initiative.
(6)
Tax impact calculated using the annual
effective tax rate, excluding discrete costs and benefits.
Adjusted Free Cash Flow:
We define Adjusted free cash flow, a non-GAAP financial measure,
as net cash flow from operating activities less purchases of
property, plant and equipment. We believe Adjusted free cash flow
is an important liquidity measure of the cash that is available
after capital expenditures for operational expenses and investment
in our business. We believe Adjusted free cash flow is useful to
investors because it measures our ability to generate or use cash.
Once our business needs and obligations are met, cash can be used
to maintain a strong balance sheet, invest in future growth and
return capital to stockholders.
The following table presents a reconciliation of net cash flow
from operating activities, the most directly comparable financial
measure calculated in accordance with GAAP, to Adjusted free cash
flow for each of the periods presented.
Three Months Ended
February 25,
2024
February 26,
2023
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Net cash provided by (used for) operating
activities
$
286.0
$
(160.8
)
Net cash used for investing activities
(71.7
)
(19.1
)
Net cash (used for) provided by financing
activities
(94.5
)
77.8
Non-GAAP measure:
Net cash provided by (used for) operating
activities
$
286.0
$
(160.8
)
Purchases of property, plant and
equipment
(71.6
)
(110.9
)
Adjusted free cash flow
$
214.4
$
(271.7
)
Return on Invested Capital:
We define Return on invested capital ("ROIC") as the trailing
four quarters of Adjusted net income before interest and after
taxes divided by the average trailing five quarters of total
invested capital. We define earnings before interest and after
taxes as Adjusted net income plus interest expense and income tax
expense less an income tax adjustment. We define total invested
capital as total debt plus shareholders' equity less cash and
short-term investments. We believe ROIC is useful to investors as
it quantifies how efficiently we generated operating income
relative to the capital we have invested in the business.
Our calculation of ROIC is considered a non-GAAP financial
measure because we calculate ROIC using the non-GAAP metric
Adjusted net income. Although ROIC is a standard financial metric,
numerous methods exist for calculating a company's ROIC. As a
result, the method we use to calculate our ROIC may differ from the
methods used by other companies. This metric is not defined by GAAP
and should not be considered as an alternative to earnings measures
defined by GAAP.
The table below sets forth the calculation of ROIC for each of
the periods presented.
Trailing Four Quarters
February 25,
2024
February 26,
2023
(Dollars in millions)
(Unaudited)
Net income
$
124.3
$
488.0
Numerator
Adjusted net income(1)
$
408.5
$
549.6
Interest expense
45.2
32.2
Adjusted income tax expense
38.5
64.2
Adjusted net income before interest and
taxes
492.2
646.0
Income tax adjustment(2)
(42.3
)
(67.6
)
Adjusted net income before interest and
after taxes
$
449.9
$
578.4
_____________
(1)
Adjusted net income is reconciled from net
income which is the most comparable GAAP measure. Refer to Adjusted
Net Income table for more information.
(2)
Tax impact calculated using the trailing
four quarters effective tax rate, excluding discrete costs and
benefits.
Average Trailing Five
Quarters
February 25,
2024
February 26,
2023
(Dollars in millions)
(Unaudited)
Denominator
Total debt, including operating lease
liabilities
$
2,179.8
$
2,163.5
Shareholders' equity
1,973.8
1,830.4
Cash and Short-term investments
(400.7
)
(579.4
)
Total invested Capital
$
3,752.9
$
3,414.5
Net income to Total invested capital
3.3
%
14.3
%
Return on Invested Capital
12.0
%
16.9
%
Constant-Currency:
We calculate constant-currency amounts by translating local
currency amounts in the comparison period at actual foreign
exchange rates for the current period.
Constant-Currency Net Revenues:
The table below sets forth the calculation of net revenues by
segment on a constant-currency basis for the comparison period
applicable to the three-month period ended February 25, 2024:
Three Months Ended
February 25,
2024
February 26,
2023
%
Increase
(Decrease)
(Dollars in millions)
(Unaudited)
Total net revenues
As reported
$
1,557.6
$
1,688.9
(7.8
)%
Impact of foreign currency exchange
rates
—
(0.8
)
*
Constant-currency net revenues
$
1,557.6
$
1,688.1
(7.7
)%
Americas
As reported
$
735.8
$
823.0
(10.6
)%
Impact of foreign currency exchange
rates
—
7.9
*
Constant-currency net revenues -
Americas
$
735.8
$
830.9
(11.4
)%
Europe
As reported
$
423.5
$
455.1
(7.0
)%
Impact of foreign currency exchange
rates
—
5.2
*
Constant-currency net revenues -
Europe
$
423.5
$
460.3
(8.0
)%
Asia
As reported
$
288.8
$
289.5
(0.3
)%
Impact of foreign currency exchange
rates
—
(14.4
)
*
Constant-currency net revenues - Asia
$
288.8
$
275.1
5.0
%
Other Brands
As reported
$
109.5
$
121.3
(9.7
)%
Impact of foreign currency exchange
rates
—
0.5
*
Constant-currency net revenues - Other
Brands
$
109.5
$
121.8
(10.1
)%
___________
* Not meaningful
The table below sets forth the calculation of net revenues by
channel on a constant-currency basis for the comparison period
applicable to the three-month period ended February 25, 2024:
Three Months Ended
February 25,
2024
February 26,
2023
%
Increase
(Decrease)
(Dollars in millions)
(Unaudited)
Total net revenues
As reported
$
1,557.6
$
1,688.9
(7.8
)%
Impact of foreign currency exchange
rates
—
(0.8
)
*
Constant-currency net revenues
$
1,557.6
$
1,688.1
(7.7
)%
Wholesale
As reported
$
803.5
$
984.9
(18.4
)%
Impact of foreign currency exchange
rates
—
3.5
*
Constant-currency net revenues -
Wholesale
$
803.5
$
988.4
(18.7
)%
DTC
As reported
$
754.1
$
704.0
7.1
%
Impact of foreign currency exchange
rates
—
(4.3
)
*
Constant-currency net revenues - DTC
$
754.1
$
699.7
7.8
%
___________
* Not meaningful
Constant-Currency Adjusted EBIT and Constant Currency
Adjusted EBIT margin:
Three Months Ended
February 25,
2024
February 26,
2023
%
(Decrease)
(Dollars in millions)
(Unaudited)
Adjusted EBIT(1)
$
140.7
$
185.3
(24.1
)%
Impact of foreign currency exchange
rates
—
(1.6
)
*
Constant-currency Adjusted EBIT
$
140.7
$
183.7
(23.4
)%
Adjusted EBIT margin
9.0
%
11.0
%
(18.2
)%
Impact of foreign currency exchange
rates
—
(0.1
)
*
Constant-currency Adjusted EBIT
margin(2)
9.0
%
10.9
%
(17.4
)%
_____________
(1)
Adjusted EBIT is reconciled from net
(loss) income which is the most comparable GAAP measure. Refer to
Adjusted EBIT and Adjusted EBITDA table for more information.
(2)
We define constant-currency Adjusted EBIT
margin as constant-currency Adjusted EBIT as a percentage of
constant-currency net revenues.
* Not meaningful
Constant-Currency Adjusted Net Income and Adjusted Diluted
Earnings per Share:
Three Months Ended
February 25,
2024
February 26,
2023
%
(Decrease)
(Dollars in millions, except
per share amounts)
(Unaudited)
Adjusted net income(1)
$
102.7
$
134.9
(23.9
)%
Impact of foreign currency exchange
rates
—
(2.2
)
*
Constant-currency Adjusted net income
$
102.7
$
132.7
(22.6
)%
Constant-currency Adjusted net income
margin(2)
6.6
%
7.9
%
Adjusted diluted earnings per share
$
0.26
$
0.34
(23.5
)%
Impact of foreign currency exchange
rates
—
(0.01
)
*
Constant-currency Adjusted diluted
earnings per share
$
0.26
$
0.33
(21.2
)%
_____________
(1)
Adjusted net income is reconciled from net
(loss) income which is the most comparable GAAP measure. Refer to
Adjusted net income table for more information.
(2)
We define constant-currency Adjusted net
income margin as constant-currency Adjusted net income as a
percentage of constant-currency net revenues.
* Not meaningful
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240403869087/en/
Investor Contact: Aida Orphan Levi Strauss & Co. (415)
501-6194 Investor-Relations@levi.com
Media Contact: Elizabeth Owen Levi Strauss & Co. (415)
501-7777 NewsMediaRequests@levi.com
Levi Strauss (NYSE:LEVI)
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Levi Strauss (NYSE:LEVI)
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