Levi Strauss & Co. (NYSE: LEVI) stock lost over 12% on 10th July 2019 (Source: Google finance) after the company posted mixed second-quarter earnings, saying it had to factor in $29 million in costs with its April initial public offering and foreign-exchange adjustments. Levi said it earned $29 million in the second quarter, compared with $77 million in the year-ago period. The company also expects its sales growth would slow in the second half of the year due to weakness in its wholesale business and as it wraps up its fiscal year just ahead of Black Friday. Second quarter adjusted net income declined $14 million, primarily due to $10 million lower net gains on foreign exchange derivatives. Second-quarter Adjusted EBIT fell four percent on the back of unfavorable currency, but grew three percent on a constant-currency basis, despite planned higher advertising and promotion expense. At May 26, 2019, cash and cash equivalents of $861 million and short-term investments of $80 million were complemented by $806 million available under the company’s revolving credit facility, resulting in a total liquidity position of approximately $1.7 billion. Net debt at the end of the second quarter of 2019 was $82 million.
LEVI in the second quarter of FY 19 has reported the adjusted earnings per share of 17 cents, beating the analysts’ estimates for the adjusted earnings per share of 13 cents, according to analysts polled by FactSet. The company had reported the adjusted revenue growth of 5 percent to $1.31 billion in the first quarter of FY 19, beating the analysts’ estimates for revenue of $1.29 billion.
Moreover, the company has reported 4% rise in the gross profit for the second quarter to $700 million from $671 million. Gross margin was 53.3 percent of net revenues compared with 53.9 percent in the same quarter of fiscal 2018, primarily due to 100 basis-points of unfavorable currency, which was partially offset by less discounted sales and the margin benefit from growth in the company’s global direct-to-consumer channel. Operating income for the second quarter of $63 million fell 19% as higher net revenues were more than offset by higher SG&A expenses associated with higher advertising and promotion expense compared to the same quarter of fiscal 2018.
The company forecast full-year net revenue growth at the high end of the mid-single-digit range. The company expects a 100 basis point hit to its revenue from not being able to record the benefit of Black Friday.