Sales of denim maker Levi Strauss & Co. declined 62% in the second quarter of the fiscal year, the company said on Tuesday because online sales were insufficient to offset the temporary closure of its stores during Covid for about 10 weeks . 19 crisis.
Consumers have largely turned away from tight pants and jeans and instead opted for lounge wear and pants with elastic waist bands that they can wear anywhere – if they buy clothes at all.
Levi’s also announced that around 15% of its global workforce will be cut by companies, which will affect around 700 jobs to cut costs during the coronavirus pandemic. The move should generate annual savings of $ 100 million for Levi̵
Shares initially fell after close of trading, but recently rose less than 1%.
“Although we are starting to see some green shoots, we still need to be careful,” Chief Executive Chip Bergh said in a memo to the company’s employees, which was received from CNBC. “There could be a second wave of Covid 19 cases and the resulting closings,” he added.
Bergh’s comments come from the fact that cases in the United States have increased rapidly in recent weeks, causing some state and local governments to slow down reopening or reintroduce measures to curb the spread of the coronavirus. According to ShopperTrak data, the decline in retail traffic has accelerated again in the past two weeks.
While around 90% of Levi’s stores around the world have reopened today, traffic and sales are still down from a year ago, said Bergh. A full recovery “will likely take time,” he said.
Here’s what Levi’s did in the quarter ending May 24:
- Adjusted loss per share: 48 cents
- Revenue: $ 498 million
The San Francisco-based company reported a net loss of $ 364 million, or 91 cents a share, compared to a net profit of $ 29 million or a profit of 7 cents a share a year ago.
Levi’s lost 48 cents per share without one-time costs.
The loss was primarily due to restructuring and inventory costs of $ 242 million related to the pandemic disruption.
Revenue decreased 62% from $ 1.31 billion in the previous year to $ 498 million.
Analysts asked Levi’s to report an adjusted loss of 49 cents per share on sales of $ 486 million, according to Refinitiv.
The company said the losses were partially offset by its e-commerce business, which grew 25% in the second quarter and accounted for 15% of total net sales in the period, compared to just 5% in the previous year.
Nevertheless, sales in the Americas region decreased overall by 59%. They fell 68% in Europe and 61% in Asia.
“Unlike some of our colleagues … we took over the brunt in a quarter,” Bergh told CNBC in a phone interview.
Now that around 90% of the businesses are back in operation, around 40% are experiencing year-on-year revenue growth that in some cases exceeds the company’s internal expectations, he said in the interview.
But Levi’s has plans in case some of these doors have to be closed again. Apple has taken the lead and closed dozens of stores in states like Florida and Texas for the second time, with Covid cases at certain hotspots still on the rise. According to Bergh, Levi’s has about 40 locations in the U.S. that are currently closely monitored and review them every Monday, Wednesday, and Friday. “There are several doors that close,” he said.
Inventories rose 10% in the second quarter, Levi’s said.
According to Bergh, a large part of Levi’s goods are “evergreen”, which means that the company can store them and they will still be fashionable next season.
Levi’s announced that the quarter ended with a total liquidity of approximately $ 2 billion. The company’s revolving credit facility still has $ 448 million available.
The company currently has no outlook for 2020.
Levi’s shares fell 27% year over year. The company has a market cap of $ 5.5 billion.