Levi Strauss & (US:LEVI)2023-01-26 00:34Financial Data and Key Metrics Changes - Q4 net revenues were flat compared to the prior year's record Q4 revenue, with a 6% growth above 2019's pre-pandemic level [28] - For the full year, reported revenues grew by 7%, and 12% in constant currency, with adjusted EPS increasing year-over-year [28] - Adjusted diluted EPS for Q4 was $0.34, at the high end of the outlook, despite a $0.04 negative impact from foreign exchange [52] Business Line Data and Key Metrics Changes - The Levi's brand grew 11% in 2022, gaining global market share, particularly in men's and women's segments [6] - Direct-to-consumer (DTC) business increased by 18% for the year, with a record Q4 performance, contributing 39% of total company net revenues [8] - Women's revenue grew 13%, surpassing $2 billion, while the tops business grew 12%, exceeding $1.2 billion [12] Market Data and Key Metrics Changes - International business grew 13% in 2022, with 15% growth excluding Russia, driven by strong performance in Latin America and Asia [35] - In the Americas, net revenues declined 5%, with strong DTC growth offset by a decline in U.S. wholesale [41] - Europe saw a modest decline of 4% in revenues, excluding Russia, but showed sequential improvement from Q3 [53] Company Strategy and Development Direction - The company aims to expand its women's and tops businesses, which are key priorities in its strategic plan [12] - The 150th anniversary of the iconic 501 jean is expected to drive brand excitement and market share growth [14] - The company is focusing on diversifying its product offerings beyond denim, with nearly 40% of 2022 revenue coming from non-denim categories [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strategies for profitable growth in 2023, despite macro uncertainties [21] - The company anticipates additional tailwinds in the second half of 2023 as product costs normalize and foreign exchange impacts lessen [21] - Management highlighted the importance of a diversified business model to navigate macroeconomic challenges [35] Other Important Information - The company plans to open more than 80 net new company-operated stores globally in 2023 [22] - Cash and liquidity remained strong, with net debt of approximately $500 million and overall liquidity of $1.5 billion [20] - The company returned approximately $350 million to shareholders in 2022, with a dividend of $0.12 per share declared for Q1 [54] Q&A Session Summary Question: What is the outlook for gross margins? - Management indicated that gross margins are structurally improved, with expectations of 20 to 30 basis points expansion driven by a favorable shift towards DTC and women's products [123] Question: How did the mass channel perform in Q4? - The mass channel, particularly Signature and Denizen, was down 19% in Q4, with expectations of continued double-digit declines in 2023 [50] Question: What is the expected revenue cadence for 2023? - The company expects a typical revenue split of 47% in the first half and 53% in the second half, with growth driven by improved conditions in the latter half [65] Question: How is the company managing inventory levels? - The company has strategically reduced buys for the first half by 25% and expects to normalize inventory levels by the end of Q2 [103] Question: What are the key drivers for growth in 2023? - Key drivers include continued strength in DTC, market share expansion, and the celebration of the 150th anniversary of the 501 jean [57]