Clothing company Levi Strauss & Co. delivered a first-quarter earnings report with lots of positives on Thursday, but the company’s stock has still seen a record drop. So what happened?
Levi managed to top the net revenue estimates of $1.62 billion by coming at $1.69 billion, while its adjusted earnings per share of $0.34 topped the EPS of $0.32 that the analysts expected. But the thing that didn’t work in the company’s favor was the gross margin of 55.8%.
The reported gross margin was 360 basis points short compared to 59.4% from the same period in 2022. It also failed to meet the expectations of analysts, who predicted 56.9%.
Some of the reasons for Levi’s declining gross margin were increased transportation costs and promotions that the company used to clear its inventory.
“We did get rid of inventory to the extent we could — that did hurt margins,” CFO Harmit Singh explained. “Promotional levels were slightly higher than anticipated.”
Levi Strauss & Co. stock (LEVI) dropped 16% to $15.14 per share on Thursday compared to the $18.03 close from the previous day. This is the biggest slide its shares have experienced since the company went public in 2019.