Levi Strauss & (LEVI)2025-04-08 00:08Financial Data and Key Metrics Changes - The company reported a strong start to 2025 with organic net revenue growth of 9%, exceeding expectations across sales, margins, and EPS [9][10][48] - Gross margin reached a record 62.1%, up from 58.2% in Q1 2024 and 56.5% in Q1 2023, driven by lower product costs and higher full-price selling [48][49] - Adjusted diluted EPS was 38 cents, up 52% year-over-year, reflecting strong financial performance [51] Business Line Data and Key Metrics Changes - Direct-to-consumer (DTC) revenue grew 12%, driven by positive comp growth and strong e-commerce performance [10][29] - The wholesale business also showed positive growth, up 5%, with U.S. wholesale specifically up 9% [10][36] - Women's business grew 12% overall, now representing 38% of net revenues, while tops grew 7% [20][26][90] Market Data and Key Metrics Changes - The U.S. business grew 8%, while international markets saw a 9% increase [11][38] - The Americas segment reported an 11% increase in net revenues, with strong performance in both DTC and wholesale channels [54] - Asia's net revenues increased by 10%, with double-digit growth in key markets like Japan and Korea [57] Company Strategy and Development Direction - The company is focused on becoming a DTC-first brand, with plans to increase DTC revenue to 55% of total business [35][66] - The strategy includes expanding product offerings beyond jeans to lifestyle categories, with significant growth in women's and tops segments [20][22] - The company aims to navigate the dynamic macro environment by leveraging its strong brand and global supply chain [12][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by recent tariff announcements but expressed confidence in the company's ability to adapt [12][60] - The company is currently assessing various scenarios and mitigation strategies related to tariffs [60][64] - Full-year guidance remains unchanged, with expectations for organic net revenue growth of 3.5% to 4.5% in Q2 [62] Other Important Information - The company closed 21 net stores but opened 30 new stores, primarily full-price Levi's brand locations [52] - The company returned $81 million to shareholders through dividends and share buybacks, reflecting a commitment to shareholder value [53] Q&A Session Summary Question: Can you provide a percentage breakdown of sourcing by key countries and discuss potential pricing strategies? - Management indicated they source from 28 countries, with key suppliers in Bangladesh, Cambodia, and Vietnam, and emphasized the brand's pricing power while considering surgical price adjustments [69][74] Question: How are you planning inventory levels going forward on wholesale orders? - Inventory levels were reported as healthy, with no changes in wholesale orders from customers, and global wholesale was up 5% [80][85] Question: What are the key drivers of the 9% organic growth? - Growth was driven by strength across all geographies and channels, with DTC up 12% and wholesale up 5%, indicating sustainable demand [96][100] Question: Can you clarify the guidance for Q2 organic net revenue growth by region? - Guidance for Q2 suggests low to mid-single-digit growth in the U.S. and mid-single-digit growth in Europe and Asia, with DTC expected to grow in the high single digits [112][113] Question: Can you walk us through the expense deleverage expected in Q2? - SG&A expenses are expected to increase in Q2, with a focus on maintaining a strong balance sheet and managing costs effectively [121][122]