The Levi Strauss & Co. label is seen on clothes in a store at the Woodbury Common Premium Outlets in Central Valley, New York, U.S., February 15, 2022.
Andrew Kelly | Reuters
Shares of Levi Strauss surged 18% on Thursday after the retailer raised its full-year profit guidance and posted holiday earnings that beat expectations.
Late Wednesday, Levi’s announced its fiscal first quarter earnings and said it expects adjusted earnings per share for fiscal 2024 to be between $1.17 and $1.27, up from a previous range of $1.15 to $1.25.
Analysts had expected a forecast of $1.21 per share, according to LSEG, formerly known as Refinitiv.
As the retailer contends with a slowdown in discretionary spending, it’s focused on what it can control: cutting costs and becoming more efficient so it can boost its bottom line.
In January, Levi’s launched an initiative that’s designed to accelerate profitable growth and save on costs. As part of the project, Levi’s cut about 12% of its global workforce. It also exited its Denizen business, which comes at a lower margin, and has relied less on aggressive discounting to drive sales.
It’s also seeing record amounts of sales happening online and through its own shops instead of through department stores like Macy’s and Kohl’s, which come at a lower margin.
“The benefits from our Project Fuel initiative are just starting to unfold, which will continue to improve the agility and the efficiency of our business,” finance chief Harmit Singh said on a call with analysts. “We will also continue to deliver positive free cash flow through inventory and working capital management.”
During the quarter, fewer promotions along with lower product costs helped to boost Levi’s gross margin by 2.4 percentage points to 58.2%, up from 55.8% a year earlier.