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Category: Stock Market and Levi Strauss (LEVI)
Date: 8 July 2020 Stock Price of Levi: $13.83 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Levi Strauss, the world's best known jeans maker, with revenues of over $498 million for the quarter, down a whopping -62% compared to the same period of the prior year, as the Covid-19 pandemic hit the group particularly hard.
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It’s been an unprecedented quarter, and we have been swift and agile in responding to the impact of the pandemic on our business said Harmit Singh, executive vice president and chief financial officer of Levi Strauss & Co "
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.™, and Denizen® 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 3,000 retail stores and shop-in-shops. Levi Strauss & Co.'s reported 2018 net revenues were $5.6 billion.
Overview of Levi Strauss's 2nd quarter 2020 earnings report
- Total Revenues: $497.542 million (down from $1.312 billion for the same quarter of the previous year)
- Total Revenues decreased by -62.1% over the last 12 months
- Cost of sales: $327.890 million (down from $612.517 million for the same quarter of the previous year)
- Cost of sales decreased by -46.4% over the last 12 months
- Net loss: -$363.539 million (down from $28.230 million for the same quarter of the previous year)
- Diluted loss per share: -$0.91 (down from $0.07 for the same quarter of the previous year)
- PE ratio: Since Levi Strauss & Co is loss making right now a PE ratio cannot be right now
- Diluted weighted-average shares outstanding: 397.484 million (up from 409.332 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.448 billion
- Cash and cash equivalents per share: $3.64
- Cash and cash equivalents makes up 26.3% of Levi Strauss' market capital
- Cash and cash equivalents makes up 26.4% of Levi Strauss' total assets
- Trade receivables: $333.599 million
- Accounts receivable makes up 6.1% of Levi Strauss' total assets
- Stockholders equity of Levi Strauss: $1.165 billion
- Stockholders equity per share: $2.93
- So Levi Strauss is trading at 4.72 times its stockholders equity which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For some perspective firms in the S&P 500 trades at an average price to book value of 3.7
- Stockholders equity per share: $2.93
Levi Strauss' management commentary on their 2nd quarter 2020 earnings report
SAN FRANCISCO--(BUSINESS WIRE)-- Levi Strauss & Co. (NYSE: LEVI) today announced financial results for the second quarter ended May 24, 2020.
The coincidence of the company’s fiscal quarter with the roughly ten-week duration of the temporary closure of the company’s and its customers’ stores in response to the COVID-19 pandemic resulted in a significant adverse impact to revenues, earnings and cash flows. As stores have reopened, performance has trended better than the company’s expectations.
“We started the year with strong momentum, but the global pandemic and economic crises had a significantly negative impact on our second quarter results, as our stores and most wholesale doors were closed around the world for the majority of the quarter. I’m proud of how the team stepped up in response, accelerating our activation of key e-commerce and omni-channel capabilities, proactively cutting costs and managing cash smartly, and finding innovative ways to connect the Levi’s brand with its fans,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co. “As part of our response, to enable us to become a leaner and more market-responsive organization, as well as give us greater confidence in our cost structure given the uncertainties around the impact of the virus, we have made the difficult decision to reduce our non-retail, non-manufacturing workforce by about 700 positions, or roughly 15 percent, which we expect will generate annualized savings of $100 million.”
Bergh continued, “the pandemic is accelerating retail landscape shifts and consumer behavior in ways that play to the strength of the Levi’s brand. And we are doubling down on our digital transformation, incorporating the power of AI and data science, and leveraging our iconic brands to have an even stronger focus on Gen Z and sustainability. We believe this will enable us to further grow our market leadership position and emerge from this crisis a stronger company.”
The coincidence of the company’s fiscal quarter with the roughly ten-week duration of the temporary closure of the company’s and its customers’ stores in response to the COVID-19 pandemic resulted in a significant adverse impact to revenues, earnings and cash flows. As stores have reopened, performance has trended better than the company’s expectations.
“We started the year with strong momentum, but the global pandemic and economic crises had a significantly negative impact on our second quarter results, as our stores and most wholesale doors were closed around the world for the majority of the quarter. I’m proud of how the team stepped up in response, accelerating our activation of key e-commerce and omni-channel capabilities, proactively cutting costs and managing cash smartly, and finding innovative ways to connect the Levi’s brand with its fans,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co. “As part of our response, to enable us to become a leaner and more market-responsive organization, as well as give us greater confidence in our cost structure given the uncertainties around the impact of the virus, we have made the difficult decision to reduce our non-retail, non-manufacturing workforce by about 700 positions, or roughly 15 percent, which we expect will generate annualized savings of $100 million.”
Bergh continued, “the pandemic is accelerating retail landscape shifts and consumer behavior in ways that play to the strength of the Levi’s brand. And we are doubling down on our digital transformation, incorporating the power of AI and data science, and leveraging our iconic brands to have an even stronger focus on Gen Z and sustainability. We believe this will enable us to further grow our market leadership position and emerge from this crisis a stronger company.”
“It’s been an unprecedented quarter, and we have been swift and agile in responding to the impact of the pandemic on our business,” said Harmit Singh, executive vice president and chief financial officer of Levi Strauss & Co. “We have taken measures to improve the structural economics of our company, prudently manage inventories and further solidify liquidity. As a result of our actions, in the second quarter, we increased total liquidity to $2 billion, reduced Adjusted SG&A by $157 million and managed inventories to only a ten-percent increase over prior year. We are encouraged by early signs of recovery, as roughly 90 percent of our company-operated and franchisee doors have now reopened globally, with nearly 40 percent of our company-operated stores comping positive as we exited the month, which in combination with our cost and working capital actions resulted in positive cash flow generation in June. We are confident that the steps we are taking to sustainably reduce our costs and drive greater efficiencies in working capital will enable us to further expand Adjusted EBIT margins and drive cash flows as we emerge from the crisis.”
COVID-19 Update
In mid-March, in response to the COVID-19 pandemic, the substantial majority of the company’s and its franchise and wholesale customers’ retail locations temporarily closed in the Americas and Europe, as well as in most of Asia outside greater China and Korea. By the end of May, only a portion of these doors had reopened, and with a wide variation in level of sales productivity as compared to prior year, depending on local market conditions. The coincidence of the company’s fiscal second quarter with the roughly ten-week duration of the temporary closures resulted in a significant adverse impact to revenues, earnings and cash flows.
In response to the pandemic and the uncertainty of its duration, the company took several measures to respond. It accelerated the deployment of several omni-channel initiatives including virtual concierge, ship from store, buy online pick up in store, and continued the roll out of its mobile app and loyalty program to augment its direct-to-consumer business. To reduce its costs and streamline operations, the company implemented cost-reduction and inventory-management initiatives that the company expects will support its objective to expand Adjusted EBIT margins over time. It enhanced its liquidity position by issuing an additional $500 million of its 5.00% senior notes due 2025. These actions resulted in $2 billion of liquidity at the end of the second quarter. The company’s goal is to become a stronger, more profitable company coming out of this unprecedented crisis.
In addition to the adverse impacts of the COVID-19 pandemic on the company’s second quarter financial results, the company recorded $242 million in incremental charges taken in connection with the pandemic. The $242 million was comprised of incremental COVID-19 related inventory costs of $87 million and $88 million of other charges for customer receivables and asset impairments, and $67 million of charges related to restructuring actions which the company anticipates will generate annualized cost savings of approximately $100 million.
Currently, roughly 90 percent of company-operated doors and franchisee doors have reopened globally, as well as the majority of third-party retail locations. While traffic and sales remain down to prior year, weekly sales performance in company-operated doors is sequentially improving, as store sales productivity in the final week of June as compared to prior year approached 80 percent, with nearly 40 percent of open company-operated store locations delivering positive net revenues growth compared to the same week in the prior year. As store locations have reopened, the company’s e-commerce net revenues growth has remained strong, at nearly 70 percent growth for the month of June as compared to the same month in the prior year. Cash flow trends are also improving, as net cash flows from operations were positive in June.
Although trends appear to be improving sequentially, the ultimate health and economic impact of the COVID-19 pandemic remains highly uncertain. The company expects that its business and results of operations, including net revenues, earnings and cash flows, will continue to be significantly adversely impacted for at least the balance of 2020, and there remains the possibility of additional COVID-19 related inventory and other charges.
COVID-19 Update
In mid-March, in response to the COVID-19 pandemic, the substantial majority of the company’s and its franchise and wholesale customers’ retail locations temporarily closed in the Americas and Europe, as well as in most of Asia outside greater China and Korea. By the end of May, only a portion of these doors had reopened, and with a wide variation in level of sales productivity as compared to prior year, depending on local market conditions. The coincidence of the company’s fiscal second quarter with the roughly ten-week duration of the temporary closures resulted in a significant adverse impact to revenues, earnings and cash flows.
In response to the pandemic and the uncertainty of its duration, the company took several measures to respond. It accelerated the deployment of several omni-channel initiatives including virtual concierge, ship from store, buy online pick up in store, and continued the roll out of its mobile app and loyalty program to augment its direct-to-consumer business. To reduce its costs and streamline operations, the company implemented cost-reduction and inventory-management initiatives that the company expects will support its objective to expand Adjusted EBIT margins over time. It enhanced its liquidity position by issuing an additional $500 million of its 5.00% senior notes due 2025. These actions resulted in $2 billion of liquidity at the end of the second quarter. The company’s goal is to become a stronger, more profitable company coming out of this unprecedented crisis.
In addition to the adverse impacts of the COVID-19 pandemic on the company’s second quarter financial results, the company recorded $242 million in incremental charges taken in connection with the pandemic. The $242 million was comprised of incremental COVID-19 related inventory costs of $87 million and $88 million of other charges for customer receivables and asset impairments, and $67 million of charges related to restructuring actions which the company anticipates will generate annualized cost savings of approximately $100 million.
Currently, roughly 90 percent of company-operated doors and franchisee doors have reopened globally, as well as the majority of third-party retail locations. While traffic and sales remain down to prior year, weekly sales performance in company-operated doors is sequentially improving, as store sales productivity in the final week of June as compared to prior year approached 80 percent, with nearly 40 percent of open company-operated store locations delivering positive net revenues growth compared to the same week in the prior year. As store locations have reopened, the company’s e-commerce net revenues growth has remained strong, at nearly 70 percent growth for the month of June as compared to the same month in the prior year. Cash flow trends are also improving, as net cash flows from operations were positive in June.
Although trends appear to be improving sequentially, the ultimate health and economic impact of the COVID-19 pandemic remains highly uncertain. The company expects that its business and results of operations, including net revenues, earnings and cash flows, will continue to be significantly adversely impacted for at least the balance of 2020, and there remains the possibility of additional COVID-19 related inventory and other charges.
Levi Strauss (NYSE: LEVI) stock price history
The image below, obtained from Google, shows the stock price history of Levi Strauss since their listing in April 2019. And it's been a pretty depressing time for Levi stockholders. At its listing it was trading at $22 and its currently trading at $13.83 a stock. That's a loss of -37.1% suffered by Levi Strauss stockholders since its listing.
The stock of Levi Strauss is trading at a lot closer to its 52 week low of $9.09 than it is to its 52 week high of $23.74 which to us is a clear indication that the short term sentiment and momentum of Levi Strauss' stock is negative at this point in time.
The stock of Levi Strauss is trading at a lot closer to its 52 week low of $9.09 than it is to its 52 week high of $23.74 which to us is a clear indication that the short term sentiment and momentum of Levi Strauss' stock is negative at this point in time.
Recent coverage of Levi Strauss
The extract below discusses the latest on Levi Strauss as obtained from Fool.com
Shares of Levi Strauss (NYSE:LEVI) slid 30.5% through the first six months of 2020, according to data provided by S&P Global Market Intelligence. The COVID-19 pandemic hit Levi's business particularly hard since it generated only 5% of its total revenue last year through e-commerce channels.
Levi Strauss was not one of Wall Street's favorite retail stocks heading into 2020. Its share price fell 14% in 2019 following Levi's initial public offering in March. Investors were discouraged by a lack of revenue growth, which can be blamed on wholesale weakness. The COVID-19 pandemic made things worse as Levi's joined most non-essential retailers in closing its stores during its second quarter.
So whatLevi's has faced problems in the Americas region because the U.S. wholesale market has been soft. That has overshadowed its growth in other sales channels, such as company-operated stores and online sales, which together provided roughly a third of revenue at the start of 2020.
On April 7, Levi's reported total revenue growth of 5% for its fiscal first quarter, which ran through Feb. 23. Direct-to-consumer revenue, including online sales, grew by 13% on a constant-currency basis. Non-GAAP earnings per share improved by $0.02 to $0.40, which included some minor early headwinds from COVID-19 and unfavorable foreign currency exchange rate shifts
Read the full article here
Shares of Levi Strauss (NYSE:LEVI) slid 30.5% through the first six months of 2020, according to data provided by S&P Global Market Intelligence. The COVID-19 pandemic hit Levi's business particularly hard since it generated only 5% of its total revenue last year through e-commerce channels.
Levi Strauss was not one of Wall Street's favorite retail stocks heading into 2020. Its share price fell 14% in 2019 following Levi's initial public offering in March. Investors were discouraged by a lack of revenue growth, which can be blamed on wholesale weakness. The COVID-19 pandemic made things worse as Levi's joined most non-essential retailers in closing its stores during its second quarter.
So whatLevi's has faced problems in the Americas region because the U.S. wholesale market has been soft. That has overshadowed its growth in other sales channels, such as company-operated stores and online sales, which together provided roughly a third of revenue at the start of 2020.
On April 7, Levi's reported total revenue growth of 5% for its fiscal first quarter, which ran through Feb. 23. Direct-to-consumer revenue, including online sales, grew by 13% on a constant-currency basis. Non-GAAP earnings per share improved by $0.02 to $0.40, which included some minor early headwinds from COVID-19 and unfavorable foreign currency exchange rate shifts
Read the full article here
Levi Strauss (NYSE: LEVI) latest stock valuation
So what is Levi Strauss stock worth based on the release of their latest earnings report? Based on Levi Strauss' latest earnings and their outlook provided our valuation model provides a target price (full value price) at $19.70 a Levi Strauss stock (down from our last Levi Strauss stock valuation). We therefore believe that the stock is undervalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $19.70. Thus we see a good entry point into Levi Strauss stock at $17.70 or below. Since the stock of Levi Strauss is currently trading at well below our recommended entry point into Levi Strauss we rate Levi Strauss as a buy
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $19.70. Thus we see a good entry point into Levi Strauss stock at $17.70 or below. Since the stock of Levi Strauss is currently trading at well below our recommended entry point into Levi Strauss we rate Levi Strauss as a buy
Next earnings release of Levi Strauss (LEVI)
It is expected that Levi Strauss & Co will release their 3rd quarter 2020 earnings report in early October 2020