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Category: Stock Market and Levi Strauss
Date: 9 October 2019 Stock Price: $18.96 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Levi Strauss, the world's best known jeans maker, with revenues of over $1.4 billion a quarter.
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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 latest earnings report
- Total Revenues: $1.447 billion (up from $1.394 billion for the same quarter of the previous year)
- Total Revenues increased by 3.8% over the last 12 months
- Cost of sales: $680.335 million (up from $652.591 million for the same quarter of the previous year)
- Cost of sales increased by 4.2% over the last 12 months
- Net income: $124.509 million (down from $130.124 million for the same quarter of the previous year)
- Diluted earnings per share: $0.30 (down from $0.33 for the same quarter of the previous year)
- PE ratio: 15.8
- Diluted weighted-average shares outstanding: 413.639 million (up from 390.586 million for the same quarter of the previous year)
- Cash and cash equivalents: $863.773 million
- Cash and cash equivalents per share: $2.08
- Cash and cash equivalents makes up 11% of Levi Strauss' market capital
- Cash and cash equivalents makes up 20.86% of Levi Strauss' total assets
- Accounts receivable: $310.377 million
- Accounts receivable makes up 17.47% of Levi Strauss' total assets
- Cash generated from operations (for 9 months): $205.537 million
- Cash generated from operations per share (for 9 months): $0.496
- Stockholders equity of Levi Strauss: $1.468 billion
- Stockholders equity per share: $3.54
- So Levi Strauss is trading at 5.35 times its stockholders equity which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
Levi Strauss' management commentary on the results and fiscal guidance
SAN FRANCISCO--(BUSINESS WIRE)-- Levi Strauss & Co. (NYSE: LEVI) today announced financial results for the third quarter ended August 25, 2019.
“We delivered strong third-quarter results and remain on-track to achieve our full-year expectations,” said Chip Bergh, President and CEO of Levi Strauss & Co. “Our strategies to diversify to faster-growing, high-opportunity, high gross margin businesses continue to drive momentum, as we again grew revenues double-digits internationally, in our direct-to-consumer business, and in the women’s and tops categories. And our global wholesale business grew two percent in constant-currency, despite U.S. wholesale facing what we expect will be the toughest comparison of the year. As for the fourth quarter, we again expect strong performance in international, direct-to-consumer, women's and tops, and improved comparisons for U.S. wholesale. We'll stay focused on what we can control as we grow this business over the long-term.”
Annual Guidance
The company affirms its full-year expectations for 2019, as compared to 2018, as follows:
Additionally, due to the strong U.S. dollar, the company anticipates currency translation will adversely impact the full-year reported net revenues growth rate by about 275 basis points and the full-year reported Adjusted EBIT growth rate by about 450 basis points. The company noted that due to the timing of its fiscal year ending the final Sunday of November, its annual guidance for 2019 reflects the lack of a benefit of Black Friday, which will fall in the first quarter of 2020. Black Friday normally represents about half a point of full-year net revenues and an additional 25 basis-points of full-year adjusted EBIT margin.
“We delivered strong third-quarter results and remain on-track to achieve our full-year expectations,” said Chip Bergh, President and CEO of Levi Strauss & Co. “Our strategies to diversify to faster-growing, high-opportunity, high gross margin businesses continue to drive momentum, as we again grew revenues double-digits internationally, in our direct-to-consumer business, and in the women’s and tops categories. And our global wholesale business grew two percent in constant-currency, despite U.S. wholesale facing what we expect will be the toughest comparison of the year. As for the fourth quarter, we again expect strong performance in international, direct-to-consumer, women's and tops, and improved comparisons for U.S. wholesale. We'll stay focused on what we can control as we grow this business over the long-term.”
Annual Guidance
The company affirms its full-year expectations for 2019, as compared to 2018, as follows:
- Constant-currency net revenues growth of five-and-a-half to six percent; this incorporates the impact of the South American distributor acquisition announced in August;
- Gross margin approximately flat to prior year on a reported basis; gross margin expansion in the range of 40-60 basis points excluding all currency effects, both translation and transaction;
- Adjusted EBIT margin approximately flat to prior year on a reported basis; adjusted EBIT margin expansion in the range of 10 basis points excluding currency effects from translation;
- Effective income tax rate in the range of 19-20 percent;
- Capital expenditures of approximately $190 - $200 million and nearly 100 new company-operated store openings in 2019; and
- Full-year weighted-average diluted share count in the range of 410-415 million shares.
Additionally, due to the strong U.S. dollar, the company anticipates currency translation will adversely impact the full-year reported net revenues growth rate by about 275 basis points and the full-year reported Adjusted EBIT growth rate by about 450 basis points. The company noted that due to the timing of its fiscal year ending the final Sunday of November, its annual guidance for 2019 reflects the lack of a benefit of Black Friday, which will fall in the first quarter of 2020. Black Friday normally represents about half a point of full-year net revenues and an additional 25 basis-points of full-year adjusted EBIT margin.
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. And it's been a pretty depressing time for Levi stockholders. At its listing it was trading at $22 and its currently trading at $18.96 a stock. That's a negative return of -13.8% lost by Levi Strauss stockholders since its listing. The stock of Levi Strauss is trading at a lot closer to its 52 week low of $16 than it is to its 52 week high of $24.50 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 TheStreet.com
Shares of jeans maker Levi Strauss (LEVI) edged higher after hours Tuesday as the company reported net income per share fell 9% and adjusted earnings were stronger than expected. For the quarter ended Aug. 25 the San Francisco company earned 30 cents a share against 33 cents in the year-earlier quarter. Shares outstanding rose almost 6% to 413.6 million.
Adjusted EPS were 31 cents per share against 34 cents a year earlier. Analysts surveyed by FactSet were looking for adjusted earnings of 28 cents a share.
Revenue rose 3.8% to $1.45 billion. Analysts polled by FactSet were expecting $1.44 billion. Strength in the Europe and Asia regions helped drive the quarter. European revenue jumped 14% year over year and Asian revenue climbed 9%.
Read the full article here
Shares of jeans maker Levi Strauss (LEVI) edged higher after hours Tuesday as the company reported net income per share fell 9% and adjusted earnings were stronger than expected. For the quarter ended Aug. 25 the San Francisco company earned 30 cents a share against 33 cents in the year-earlier quarter. Shares outstanding rose almost 6% to 413.6 million.
Adjusted EPS were 31 cents per share against 34 cents a year earlier. Analysts surveyed by FactSet were looking for adjusted earnings of 28 cents a share.
Revenue rose 3.8% to $1.45 billion. Analysts polled by FactSet were expecting $1.44 billion. Strength in the Europe and Asia regions helped drive the quarter. European revenue jumped 14% year over year and Asian revenue climbed 9%.
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 (full value) price at $23.90 a Levi Strauss stock. 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 (full value) price which in this case is $23.90. Thus we see a good entry point into Levi Strauss stock at $21.50 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 (full value) price which in this case is $23.90. Thus we see a good entry point into Levi Strauss stock at $21.50 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