Levi's Q2 sales drop 62 percent, to cut 15 percent of workforce
Updated: May 28, 2021
Levi Strauss & Co., for its second quarter reported net revenues decline of 62 percent on a reported basis to 498 million dollars; due to the temporary closure of company-operated, franchise and wholesale customer retail locations as a result of the Covid-19 pandemic, partially offset by the company’s e-commerce business which grew 25 percent for the quarter, with sequential month-over-month acceleration to nearly 80 percent growth for the month of May. Gross margin decreased 19.2 percentage points on a reported basis to 34.1 percent, while adjusted gross margin was 51.5 percent, a decline of 180 basis points. The company recorded a net loss of 364 million dollars and an adjusted net loss of 192 million dollars.
“We started the year with strong momentum, but the global pandemic and economic crises had a significantly negative impact on our second quarter results, as our stores and most wholesale doors were closed around the world for the majority of the quarter,” said Chip Bergh, President and CEO of Levi Strauss & Co. in a statement, adding, “As part of our response, to enable us to become a leaner and more market-responsive organization, we have made the difficult decision to reduce our non-retail, non-manufacturing workforce by about 700 positions, or roughly 15 percent, which we expect will generate annualized savings of 100 million dollars.”
Levi Strauss says Covid-19 will continue to impact business
Adjusted EBIT for the quarter was a loss of 206 million dollars. The company added that adjusted diluted EPS was 48 cents, reflecting the adjusted net loss. The company enhanced its liquidity position by issuing an additional 500 million dollars in aggregate principal amount of its 5 percent senior notes due 2025; total liquidity was 2 billion dollars at quarter-end.
The company further said that although trends appear to be improving sequentially, the ultimate health and economic impact of the Covid-19 pandemic remains highly uncertain. The company expects that its business and results of operations, including net revenues, earnings and cash flows, will continue to be significantly adversely impacted for at least the balance of 2020, and there remains the possibility of additional Covid-19 related inventory and other charges.
Levi’s performance across geographies
In the Americas, the company’s net revenues declined 59 percent on a reported basis. The company said, decrease in net revenues was across channels and brands due to the impacts of Covid-19 and the temporary closure of company-operated and third-party retail locations across the region. The decrease in net revenues was partially offset by growth in e-commerce revenue.
In Europe, net revenues declined 68 percent on a reported basis with the exception of the e-commerce business, where increasing growth rates accelerated to 35 percent growth in May after an initial slowdown in response to Covid-19. In Asia, net revenues decreased 61 percent on a reported basis, while ecommerce revenue grew significantly driven by increased traffic.