Levi Strauss & Co (LEVI, Financial) announced its financial results for the third quarter ended August 27, 2023, on October 5, 2023. The company reported net revenues of $1.5 billion, in line with the prior year, and a 14% growth in Global DTC. The company's gross margin of 55.6% exceeded Q3 outlook.
Financial Highlights
Levi Strauss & Co (LEVI, Financial) reported net revenues of $1.5 billion, consistent with the prior year on a reported basis and 2% lower on a constant-currency basis versus Q3 2022. DTC net revenues increased 14% on a reported basis and 13% on a constant-currency basis, driven by broad-based growth in both company-operated mainline and outlet stores and e-commerce. Revenues from e-commerce grew 19% on a reported basis and 18% on a constant-currency basis reflecting double-digit growth across all brands. As a percentage of third quarter net revenues, DTC comprised 40% of total net revenues.
Wholesale net revenues declined 8% on a reported basis and 10% on a constant-currency basis as growth in Asia and Latin America was offset by declines in North America and Europe.
Regional Performance
In the Americas, net revenues decreased 5% on a reported basis and 7% on a constant-currency basis. DTC net revenues increased 12% on a reported basis and 11% on a constant-currency basis driven by company-operated mainline and outlet stores and e-commerce. Wholesale net revenues decreased 12% on a reported basis and 14% on a constant-currency basis as softness in North America was partially offset by growth in Latin America.
In Europe, net revenues decreased 2% on a reported basis and 6% on a constant-currency basis. DTC net revenues increased 10% on a reported basis and 6% on a constant-currency basis, driven by company-operated mainline and outlet stores and e-commerce. Wholesale net revenues decreased 10% on a reported basis and 14% on a constant-currency basis, reflecting the cautious order environment among wholesale partners.
Asia net revenues increased 12% on a reported basis and 18% on a constant-currency basis, reflecting growth across almost all markets, including strong growth in China. DTC net revenues rose 15% on a reported basis and 23% on a constant-currency basis, driven by strength in company-operated mainline and outlet stores and e-commerce. Wholesale net revenues increased 8% on a reported basis and 13% on a constant-currency basis.
Balance Sheet Review
As of August 27, 2023, the company's cash and cash equivalents were $295 million, while total liquidity was approximately $1.1 billion. The company’s leverage ratio was 1.6 as compared to 1.1 at the end of Q3 2022. Total inventories increased 6% on a dollar basis.
Shareholder Returns
The company returned approximately $48 million to shareholders in the third quarter, in dividends representing $0.12 per share, in line with Q3 2022. The company did not repurchase any shares in the quarter. At quarter end, the company had $680 million remaining under its current share repurchase authorization, which has no expiration date.
Fiscal 2023 Guidance
Levi Strauss & Co (LEVI, Financial) expects reported net revenues to be flat to up 1% year-over-year. Adjusted diluted EPS is expected to be on the low-end of the previously guided range of $1.10 to $1.20.
