Levi Strauss & Co announced plans to expand its retail footprint and forecast a smaller-than-expected decline in current-quarter revenue after surging online sales helped the denim maker post a surprise profit.
Shares of Levi climbed 10% in extended trading on Tuesday after the company said it would sell its Red Tab jeans collection at 500 Target Corp stores by the fall of 2021, up from 140 currently. Levi also launched its products at some Dick's Sporting Goods stores.
Many analysts had expected apparel makers to take a hit from coronavirus-driven closures of several department stores, but Levi now plans to open new stores and invest in its margin-driving online business, which grew 52% in the third quarter.
“While growth in our direct consumer business will outpace that of our wholesale channel, we continue to see opportunities to reach new consumers with new and expanded wholesale distribution,” Chief Executive Chip Bergh said on an earnings call.
Levi has also benefited from branching out into tops and women’s clothing, as strong demand for blouses, shorts and jeans accounts for a major chunk of its online sales growth.
The company forecast a 14% to 15% decline in fourth-quarter revenue, while analysts on average were expecting a 19.62% fall. Levi projected profit per share to be between 14 cents and 16 cents, in line with estimates.
Gross margin came in at 54.3% of net revenues in the third quarter ended Aug. 23, up from 53% last year, boosted by price increases and strength in its direct-to-consumer channel.
Excluding items, San Francisco, California-based Levi earned 8 cents per share, versus estimates for a loss of 22 cents.
Net revenue declined about 27% to $1.06 billion, but beat estimates of $822.3 million, according to IBES data from Refinitiv.