Levi (LEVI) Tops Q4 EPS by 5c, Revenues Beat; Offers FY20 EPS Guidance Above Consensus

Levi (NYSE: LEVI) reported Q4 EPS of $0.26, $0.05 better than the analyst estimate of $0.21. Revenue for the quarter came in at $1.57 billion versus the consensus estimate of $1.58 billion.

Fourth-Quarter 2019 Highlights

• Net revenues of $1,569 million declined 2 percent on a reported basis and were nearly flat in constant-currency. The lack of Black Friday benefit, combined with the impact from the acquisition of a South American distributor, adversely impacted the year-over-year net revenue growth comparison by about 3 percentage points on both a reported and constant-currency basis
• Gross margin increased 110 basis points on reported basis reflecting lower sales to the off-price channel and the benefit of price increases; gross margin up 130 basis points excluding currency headwind
• Net income down 2 percent and Adjusted net income down 9 percent, both reflecting lower non-operating income
• Adjusted EBIT of $146 million decreased 3 percent on reported basis and 2 percent in constant-currency; Adjusted EBIT margin of 9.3 percent was adversely impacted by the lack of a Black Friday benefit

“We are pleased with our results in Fiscal 2019,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co. “We delivered six percent revenue growth for the year on a constant-currency basis, at the high end of our expectations. Growth was broad-based by region, channel and category. Underlying fourth quarter organic revenue growth met our expectations in spite of being masked by Black Friday falling in fiscal 2020. We outperformed our fourth-quarter expectations in U.S. wholesale, gross margin and EPS. And we announced our eighth consecutive annual dividend increase. As we look ahead to 2020 and beyond, we are confident we\'ll continue to drive profitable growth over the long-term by executing our strategies."

GUIDANCE:

Levi sees FY2020 EPS of $1.18-$1.22, versus the consensus of $1.17.

The company's expectations for fiscal 2020, as compared to fiscal 2019, are as follows:

• Net revenues growth of around seven percent in constant-currency, and around six percent in reported dollars; this estimate incorporates anticipated benefits of a Black Friday week in the first quarter, and a 53rd week, which will fall in the fourth quarter and will include a second Black Friday; additionally, the benefit of the company’s acquisition of a distributor in South America is expected to be substantially offset by a change in ownership of the company’s U.S. footwear distributor, which has been purchased by one of the company’s licensee partners, which will result in a license revenue stream replacing what formerly was wholesale sales to the footwear distributor;
• Adjusted EBIT margin expansion in the range of 30-40 basis points on both a constant-currency and a reported basis, reflecting gross margin expansion partially offset by an increase in Adjusted SG&A as a percentage of revenues;
• Adjusted diluted EPS in the range of $1.18 - $1.22 on a reported basis;
• Capital expenditures of approximately $200-210 million and nearly 100 new company-operated store openings on a gross basis in 2020, in addition to 80 stores the company will take over from the company’s acquisition in South America; and
• Dividends for the full year in the range of $130 million, an increase of approximately 14 percent as compared to 2019, which we anticipate to be paid quarterly.

For earnings history and earnings-related data on Levi (LEVI) click here.

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