Levi Strauss & (US:LEVI)2020-04-08 03:44Financial Data and Key Metrics Changes - The first quarter net revenue was $1.5 billion, growing 6% year-over-year, despite an estimated $20 million adverse impact from the coronavirus [28] - Gross margin reached a record high of 55.7%, an increase of 110 basis points, driven by price increases and higher direct-to-consumer growth [30] - Adjusted diluted EPS for the first quarter was $0.40, an increase of $0.02 compared to the same quarter last year [31] Business Line Data and Key Metrics Changes - The total women's business grew 12% in the first quarter, while men's bottoms were flat [29] - Direct-to-consumer revenue grew 13%, with brick-and-mortar stores up 14% globally and e-commerce up 12% [29] - The total digital ecosystem now comprises more than 15% of total revenues, doubling in size over the past three years [29] Market Data and Key Metrics Changes - Revenue in the Americas was flat when adjusted for Black Friday, with direct-to-consumer growth of 10% [32] - Europe's revenues were up 11% when adjusted for Black Friday, with women's business growing 19% [34] - In Asia, net revenue growth was estimated at 9% when adjusted for declines related to the coronavirus and political unrest in Hong Kong [35] Company Strategy and Development Direction - The company is focused on innovation and leveraging digital tools to enhance customer engagement during the crisis [11][19] - A strong balance sheet with $1.8 billion in liquidity positions the company well to navigate the crisis [10] - The company is taking aggressive cost-cutting measures while maintaining core capabilities to ensure long-term success [14][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about emerging stronger from the crisis, citing the strength of the Levi's brand and consumer loyalty [9][23] - The company is actively managing inventory and supply chain to adapt to changing market conditions [25][37] - Management highlighted the importance of cash preservation and profit protection during the crisis [24] Other Important Information - The company has suspended its share buyback program and is focusing on cash flow management [24][39] - A $3 million philanthropic program has been announced to support community efforts related to COVID-19 [21] - The company is committed to maintaining its quarterly dividend, with a second-quarter dividend of $0.08 per share [39] Q&A Session Summary Question: How are wholesale partners responding in terms of working capital and inventory orders? - Management is working closely with wholesale partners on a case-by-case basis, managing inventory and collecting cash owed [46] Question: How does the company weigh market share versus profitability during the crisis? - The company is focused on emerging stronger, leveraging pricing power and continuing to invest in brand relationships [50][51] Question: What percentage of total inventory is seasonal versus evergreen? - Approximately 15% to 20% of inventory is seasonal, with over 70% being core products that can carry over into future seasons [65] Question: What is the early look at the order book for third and fourth quarters? - The company is adjusting inventory based on demand signals and has a flexible supply chain to respond to changes [66] Question: What are the trends in the mass channel for US wholesale? - The company continues to perform well in the mass channel, with no significant shift in product mix from tops to bottoms [73]