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LEVI STRAUSS & CO (LEVI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong top-line and margin performance: net revenues $1.84B (+12% reported, +8% organic), record gross margin 61.3% (+350 bps), operating margin 11.5%, adjusted EBIT margin 13.4%; diluted EPS $0.46 and adjusted diluted EPS $0.50 .
  • DTC momentum remained the growth engine (reported +19%; e-commerce +19%), while wholesale returned to reported growth (+6.7%); Levi’s brand strength was broad-based across women’s, men’s, DTC and wholesale .
  • FY2025 guidance introduced: reported net revenues (1%) to (2%); organic net revenues +3.5% to +4.5%; adjusted EBIT margin 10.9%–11.1%; tax ~23%; adjusted diluted EPS $1.20–$1.25 (≈$0.20 FX/tax headwind) .
  • Catalysts: sustained DTC margin expansion and record gross margin, clarity on FY2025 outlook, potential Dockers divestiture, and continued brand heat (Beyoncé campaign) supporting women’s and lifestyle expansion .

What Went Well and What Went Wrong

What Went Well

  • “We delivered a strong fourth quarter and holiday season, positioning us well as we enter 2025… broad-based strength across women’s, men’s, DTC and wholesale” — Michelle Gass, CEO .
  • Record gross margin 61.3% (+350 bps YoY) driven by lower product costs (Project Fuel), favorable channel mix, and higher full-price sales; adjusted EBIT margin expanded +120 bps to 13.4% .
  • DTC net revenues +19% (e-commerce +19%); DTC comprised 45% of total organic net revenues in Q4, with margin expansion and improved store productivity .

What Went Wrong

  • Asia segment operating margin contracted 360 bps in Q4, reflecting China underperformance and higher spend in DTC expansion and advertising .
  • SG&A grew to $901M (adjusted $880M, +17.4% YoY), driven by increased A&P, distribution expense during DC transitions, and higher incentives; adjusted SG&A margin rose to 47.8% (+220 bps YoY) .
  • Structural headwinds for FY2025 reported net revenues (FX drag ~250 bps plus exits of Denizen and footwear and lack of 53rd week totaling ~300 bps), yielding reported decline despite organic growth .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$1.441 $1.517 $1.840
Diluted EPS ($)$0.04 $0.05 $0.46
Adjusted Diluted EPS ($)$0.16 $0.33 $0.50
Gross Margin %60.5% 60.0% 61.3%
Operating Margin %1.5% 2.0% 11.5%
Adjusted EBIT Margin %6.0% 11.6% 13.4%

Segment breakdown (reported net revenues):

Segment ($USD Millions)Q2 2024Q3 2024Q4 2024
Americas$712 $757 $995
Europe$354 $407 $434
Asia$260 $247 $286
Other Brands$115 $106 $124

KPIs and cash metrics:

KPIQ2 2024Q3 2024Q4 2024
DTC Net Revenues ($USD Millions)$672.5 $669.1 $827.9
DTC % of total47% 44% 45% (organic share)
E-commerce Growth YoY (%)+19% +16% +19%
Wholesale Growth YoY (reported, %)+7% −6% +6.7%
Cash & Equivalents ($USD Millions)$641 $577 $690
Inventories YoY change (%)−7% −7% −4%
Adjusted Free Cash Flow ($USD Millions, quarter)$222.6 $2.3 $231.6

Non-GAAP adjustments (context):

  • Q4 restructuring charges $14M (Project Fuel); FY2024 restructuring charges $188.7M; FY2024 goodwill/intangible impairments $116.9M (Beyond Yoga and footwear) impacting GAAP, with adjustments reflected in adjusted net income/eps .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reported Net RevenuesFY 2025N/A(1%) to (2%) New
Organic Net Revenues GrowthFY 2025N/A+3.5% to +4.5% New
Adjusted EBIT MarginFY 2025N/A10.9% to 11.1% New
Effective Tax RateFY 2025N/A~23% New
Adjusted Diluted EPSFY 2025N/A$1.20 to $1.25 (≈$0.20 FX/tax headwind) New
Gross Margin ExpansionFY 2025N/A+100 bps to ~61% New
SG&A RateFY 2025N/A~50% (flat vs 2024) New
CapExFY 2025N/A~$260M New
Net New System DoorsFY 2025N/A50–60 New
Q1 2025 EPSQ1 2025N/A~$0.26–$0.28 (includes $0.02–$0.03 FX headwind) New
Dividend DeclaredQ4 2024N/A$0.13 per share Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
DTC profitability and marginDTC EBIT margins up >300 bps; e-comm profitability low double digits; store KPIs improving DTC margin expansion sustained; productivity improvements and systems upgrades underway Improving
Wholesale trajectorySequential improvement; Europe wholesale +4% in Q3; U.S wholesale down but improving sell-out Reported wholesale growth +6.7% in Q4; cautious FY2025 outlook flat (organic) Stabilizing
Supply chain/logisticsTransition to 3PL (Maersk, GXO) to lower fulfillment costs; temporary parallel-running cost Distribution expenses elevated in Q4 due to DC transitions; normalization expected Transitional headwind easing
FX, tariffs, macroFX headwinds intensified H2; caution on macro FY2025 planning prudent; FX drag and potential tariffs/tax changes highlighted Persistent headwind
Product performance (women’s, tops, non-denim)Women’s DTC +22%; tops reset; lifestyle expansion (skirts/dresses, outerwear) Women’s +12% in Q4; strong tops/outerwear, non-denim platforms expanding; holiday up 8% (Nov/Dec) Accelerating
ChinaDown in Q2; leadership change; reset planned Modest expectations for 2025; contributed to Asia margin contraction Challenged
Dockers strategic reviewAnnounced review in Q3; profitability breakeven (allocated) Process “going well”; FY2024 revenue $323.3M ; prudent 2025 planning Ongoing
ROIC and FCFROIC ~13.5% (Q2); strong FCF ROIC 14.9%; record FY adjusted FCF $671M Improving

Management Commentary

  • “Our sharpened focus on the core Levi’s brand is working… Our improved performance is a direct result of the work we have done to transform the company into a best-in-class omnichannel retailer.” — Michelle Gass, CEO .
  • “Gross margins accelerated… to 61.3% in Q4. Adjusted EBIT margin accelerated to 13.4%… DTC productivity and improvement of the channel’s margins by more than 300 basis points contributed to the overall margin expansion.” — Harmit Singh, CFO .
  • “We expect full-year organic net revenues to grow 3.5 to 4.5 percentage… reported net revenues down 1% to 2% given FX, exits and lack of a 53rd week.” — Harmit Singh, CFO .

Q&A Highlights

  • SG&A drivers: about half from volume and compensation incentives; remainder tied to higher advertising (including Beyoncé campaign), e-commerce demand advertising, 53rd week (~$25M), and distribution cutovers; normalization expected in 2025 .
  • Wholesale outlook: Q4 inflected to growth; FY2025 guided flat organically with prudence given channel volatility; Europe order book positive .
  • DTC margin expansion levers: streamlined selling model, refined labor and compensation, systems upgrades for forecasting/inventory; e-commerce EBIT low double digits .
  • Regional growth breakdown: FY2025 organic growth low-to-mid single digits across Americas, Europe, and Asia .
  • Distribution expenses: 2024 up ~21% with half due to line reclassification (from selling to distribution) and ~6% growth from parallel-running DCs; savings expected late 2025/early 2026 .
  • Dockers profitability and process: revenue ~$323M FY2024; allocated EBIT breakeven; sale process progressing, targeted in 2025 .

Estimates Context

  • Wall Street consensus via S&P Global could not be retrieved today due to data access limits; as a result, we cannot quantify beats/misses versus consensus for Q4 2024, FY2024, or FY2025. Company commentary indicated “better-than-expected bottom-line results” in Q4 .
  • Suggest revisiting consensus comparisons when SPGI access is available.

Key Takeaways for Investors

  • DTC-led model is driving structural margin improvements (record gross margin, rising adjusted EBIT); sustained execution here is central to the medium-term margin thesis .
  • FY2025 organic growth outlook (+3.5%–4.5%) paired with EBIT margin expansion (10.9%–11.1%) implies continued profit leverage despite reported revenue headwinds from FX and portfolio exits; focus on quality of earnings over reported growth .
  • Wholesale stabilization reduces volatility; Europe order books and U.S sell-through improvements are constructive, but management remains prudent—watch for channel mix impacts on margins .
  • Dockers strategic outcome is a potential catalyst to sharpen focus, improve mix, and redeploy capital; monitor timing and valuation implications .
  • Product pipeline (women’s, tops, lifestyle, non-denim platforms) and marketing (Beyoncé) underpin full-price sell-through and AUR—key for sustaining gross margin above 60% .
  • Near-term trading: Q1 2025 EPS guide ~$0.26–$0.28 with margin expansion (gross +150–200 bps) may be a check-point; FX remains a headline risk; supply-chain transition costs should ebb through 2025 .
  • Capital returns: dividend maintained/increased ($0.13 declared) and buybacks continue; record FY adjusted FCF strengthens balance sheet resilience .

Appendix: Additional Details

  • Shareholder returns: Q4 dividend $0.13 and ~$30M buybacks (1.6M shares), FY returned $289M (dividends $199M; buybacks $90M) .
  • Balance sheet: Cash $690M; total liquidity ≈$1.5B; inventories down 4% YoY .
  • Organic revenue math (Q4): Adjustments include FX, 53rd week, divestitures (Denizen, footwear) yielding organic net revenues $1.735B (+7.9% YoY) .