Falling incomes Levi Strauss reflects the crisis the industry retailers of clothing emerging from the largest closures of physical stores because of the pandemic. In the opinion of management Levi, “the recovery will take time.”
Shares of Levi Strauss (LEVI) fell 4% after the manufacturer of denim clothing reported disappointing second quarter results, ended may 24.
The main sales channel – physical stores Levi were closed the greater part of the quarter – 10 weeks due to quarantine measures. The growth of electronic sales by 25% could not compensate for strong loss of sales in stores.
The company reported a 62% strength drop in the total income of the 2nd quarter to $498 million, compared with revenues of $1.31 billion in the same quarter last year. At the same time, it’s higher than the $486 million that analysts had expected.
However, sales in North and South America as a whole declined 59% drop in Europe and Asia made up 68% and 61%, respectively.
Loss per share Levi $0.48, which is also a little better than average forecasts at just $0.49 loss per share. The overall quarterly loss (net loss) of the retailer totaled $364 million, compared with profit of $29 million a year ago.
According to the company, the losses were mainly related to restructuring costs in the amount of $242 million and the cost of inventory associated with shortages during a pandemic.
Digital sales Levi grew by almost 80% in may, compared with April, and also increased its share to 15% in total revenues for the quarter, compared to 5% a year earlier.
Currently, about 90 percent of Levi Strauss work, about 40% of them reported a rise in sales compared to last year, some say the sales expectations of the company.
However, the CEO of Levi Strauss Chip Bergh admits that there is a second wave of morbidity COVID-19, which may again lead to the closure of stores.
“Traffic and sales still lagged behind the level a year ago, complete recovery will probably take some time,” said Berg.
The company has announced that it will cut about 15% of all staff, this will affect approximately 700 jobs. The move could bring an annual savings for Levi in the amount of $100 million and will allow to withstand the impact of losses during a pandemic.
Currently, the company does not give a forecast for 2020.
Levi’s said that it has completed the quarter with total liquidity of about $2 billion, with $448 million remained available under the revolving line of credit of the company.
A positive factor at the moment is the fact that the weekly sales in stores Levi has consistently improved, while sales in the last week of June reached a growth of 80% compared to a year earlier.