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Levi’s Sees Improved Gross Profit Margin but Lower Operating Income
Sectors & Markets
19 July, 2024
Table of contents
Levi Strauss & Co. recently released its quarterly financial report for the second quarter ending May 26, 2024. This comprehensive analysis delves into the company's key financial performance indicators, geographical performance, sales by channel, brand distribution, and its remarkable achievements in environmental, social, and governance (ESG) efforts. The financial report was officially published on 1st July 2024.
For the second quarter of 2024, Levi Strauss & Co. reported net revenues of €1.441,2 million, an increase from €1.336,8 million in the previous year. The gross profit margin improved to 60,5%, reflecting better cost management and product mix. However, operating income experienced a decline, dropping to €21,9 million from €167,3 million in the same quarter of the previous year, primarily due to restructuring charges associated with the global productivity initiative, Project Fuel.
In terms of regional performance, the Americas remain the largest market, contributing €712,2 million in revenue, followed by Europe with €353,7 million, and Asia with €260,0 million. Despite challenges, the European market demonstrated resilience, with direct-to-consumer sales showing robust growth. Asia's performance was stable, although slightly impacted by economic uncertainties in key markets.
Levi Strauss & Co. generates revenue through wholesale and direct-to-consumer channels. Wholesale revenues stood at €768,7 million, while direct-to-consumer channels contributed €672,5 million. The company's strategic focus on enhancing its direct-to-consumer business has shown positive results, particularly in Europe and the Americas, where the channels saw considerable growth compared to the previous period.
The company's brand portfolio, including Levi’s, Signature by Levi Strauss & Co.™, Denizen, Dockers, and Beyond Yoga, continues to perform well. The Levi’s brand remains the flagship, accounting for the majority of the revenue. The recent acquisition of operating assets from Expofaro S.A.S in Colombia is expected to bolster the brand's presence in Latin America, adding 40 retail stores and one e-commerce site to its portfolio.
Levi Strauss & Co. has made significant strides in its ESG initiatives, reinforcing its commitment to sustainability and social responsibility.
The company has implemented several initiatives to reduce its environmental footprint, including water-saving technologies and sustainable sourcing practices. These efforts have led to a 20% reduction in water usage across its supply chain. Additionally, Levi’s has committed to sourcing 100% of its cotton from sustainable sources by 2025.
Levi Strauss & Co. continues to uphold its commitment to fair labour practices and community engagement. The company has been actively involved in various social initiatives, such as supporting local communities through educational programmes and providing emergency relief during natural disasters.
The company has strengthened its governance framework by enhancing transparency and accountability. This includes rigorous oversight of its supply chain and adherence to the highest ethical standards in business operations.
Levi Strauss & Co.'s second-quarter financial results highlight both challenges and opportunities. The company's strong brand portfolio, coupled with strategic initiatives like Project Fuel, positions it well for future growth. The focus on expanding direct-to-consumer channels and enhancing operational efficiency is expected to drive profitability in the coming years. Furthermore, Levi Strauss & Co.'s unwavering commitment to sustainability and social responsibility will continue to bolster its reputation and market position.
In conclusion, while the second quarter of 2024 presented some financial challenges, Levi Strauss & Co. has demonstrated resilience and a clear vision for the future. The company aims to achieve long-term profitable growth by leveraging its brand strength, enhancing operational efficiencies, and maintaining its leadership in sustainability and social responsibility. Further analysis could involve a deeper dive into consumer behaviour trends and competitive positioning in the global market.
Read the full Levi Strauss & Co. report Here.
Cover Image Courtesy: Levi’s, Facebook Page