Investing.com -- Levi Strauss & Co hiked its guidance on full-year earnings after the denim jeans company reported Wednesday's first-quarter results that topped analysts' estimates, driven by a jump in margins amid cost cuts.
Levi Strauss (NYSE:LEVI) shares jumped more than 8% in premarket trading Thursday.
The apparel maker said it now sees earnings per share in a range of $1.17 to $1.27, up from a prior range of $1.15 to $1.25, topping Wall Street estimates of $1.21. While revenues were expected to be up 1% to 3% year-over-year, unchanged from a prior forecast.
For the three months ended Feb. 25, Levi reported adjusted fiscal Q1 EPS of $0.26, down from $0.34 as revenue fell to $1.56 billion from $1.69 billion a year earlier. That was, however, ahead of Wall Street forecasts for EPS of $0.20 and revenue of $1.54 billion.
Gross margin climbed 240 basis points to 58.2% from Q1 2023, driven by "lower product costs and favorable mix shift," the company said.
Direct-to-consumer net revenue was up 7%, led by a 10% increase in the U.S. and a 4% increase in Europe, excluding Russia, while wholesale net revenues declined 18%.
Commenting on a modest guidance hike, Stifel analysts said: “With much of the year ahead, we view this approach as prudent, and expect continuation of underlying trends could support further upside as the year unfolds.”
“Product diversification efforts are showing encouraging progress, and denim dresses and skirts (+triple-digits y/y) demonstrate capitalization on burgeoning trends. Project Fuel initiatives are tracking to the $100mn cost savings target in FY24, and greater potential in FY25,” they added.
In turn, Stifel’s team adjusted its projections for Levi's, slightly raising both revenue and earnings forecasts towards the upper end of the company's guidance range.
Alongside these revised estimates, they have also increased their target price for Levi's stock to $24.
JPMorgan (NYSE:JPM) analysts believe “the bar had been lowered” for Levi’s following PVH’s recent results. With some investors raising concerns about a potential Q1 miss or lower guide from Levi’s, “this print comes as a bit of a relief,” the analyst said in a note.
“Topline beat in c/c across all regions with DTC momentum strong and wholesale remaining weaker (channel dynamic as expected but DTC looks even better than anticipated). Margins also a solid source of upside,” the note said.
(Yasin Ebrahim contributed reporting)