Levi Strauss Tops Q2 Estimates, Lifts Sales and EPS Outlook Alongside Dividend Hike

Levi Strauss & Co. (LEVI) reported second-quarter results that beat analysts' predictions on both earnings and revenue, prompting the denim giant to increase its full-year outlook and boost its dividend payout.

The company now projects adjusted earnings per share between $1.46 and $1.52 for the year, up from the previous range of $1.42 to $1.48. This revision nudges the top end above the consensus estimate of $1.50 per share.

Revenue is also getting a lift in Levi's forecasts, with expected net sales growth climbing to between 7% and 7.5%, compared to the earlier guidance of 5.5% to 6.5%. Analysts were estimating roughly 6.6% growth. Notably, about half of this expansion comes from volume increases, challenging the impression that the gains stem solely from price hikes, according to CFO Harmit Singh.

On the quarter, Levi posted adjusted earnings of 28 cents per share, surpassing the 24-cent expectation. Revenue reached $1.56 billion, outpacing forecasts of $1.52 billion and marking about 8% growth year-over-year from $1.45 billion.

The company's net income came in at $87.3 million, or 22 cents per share, improving from $67 million, or 17 cents per share, last year. Despite these stronger-than-expected figures, Levi's shares slipped more than 5% in after-hours trading.

CEO Michelle Gass pointed out resilience in the brand's core customer base, even with inflation pressures like rising gas prices. She emphasized that roughly two-thirds of sales gains were driven by unit volume growth rather than just price increases, signaling robust consumer appetite.

Levi's performance showed strength across its product lines, including its core Levi's brand, premium Blue Tab, and Signature collections. This diversified appeal appears to underpin both the raised guidance and the decision to increase dividends.

Some investors might find it curious that shares dropped despite a bullish earnings report and guidance hike. It raises a question about whether market expectations had already priced in this strong performance or whether other concerns linger in the apparel sector.