Levi Strauss & Co. Reports Strong Fourth-Quarter Results

Reported Net Revenues Grew 12%, Organic¹ Net Revenues up 8%

Net Revenue Growth Driven by Both Global DTC and Wholesale

Gross Margin Rose 350 Basis Points to 61.3%, Which Drove Solid Operating Margin Expansion

Diluted EPS of $0.46, and Adj Diluted EPS up 14% to $0.50

Provides Fiscal Year 2025 Guidance

Levi Strauss & Co. (NYSE:LEVI) today announced financial results for the fourth quarter and fiscal year ended December 1, 2024.

"We delivered a strong fourth quarter and holiday season, positioning us well as we enter 2025. Our sharpened focus on the core Levi's® brand is working, with broad-based strength across women's, men's, DTC and wholesale," said Michelle Gass, President and CEO of Levi Strauss & Co. "Our improved performance is a direct result of the work we have done to transform the company into a best-in-class omnichannel retailer. We have a strong plan for the year ahead supported by a robust product pipeline, the continuation of our marketing campaign with Beyoncé and continued retail expansion."

"In Q4, the company delivered accelerating revenue growth, up 8% on an organic basis, significantly improved DTC profitability, strong cash flow generation and better-than-expected bottom-line results," said Harmit Singh, Chief Financial and Growth Officer of Levi Strauss & Co. "The strong demand trends, improving execution and the organization's focus on the Levi's® brand gives me confidence in the guidance we are providing today which calls for higher organic revenue growth in 2025, in addition to continued strong margin expansion."

Financial Highlights for the Fourth-Quarter

• Net Revenues of $1.8 billion increased 12% on a reported basis and 8% on an organic basis versus Q4 2023.¹ Organic net revenues exclude the impacts of foreign exchange rates, divested businesses, acquisitions, and any 53rd week from the change in reported net revenues. Please see reconciliation of Organic Net Revenues in the Non-GAAP Financial Measures section below.
  • In the Americas, net revenues increased 12% on a reported basis and 9% on an organic basis. Within the Americas, the U.S. grew 6% on an organic basis.
  • In Europe, net revenues increased 15% on a reported basis and 6% on an organic basis, reflecting growth across a majority of markets.
  • Asia net revenues increased 9% on a reported and organic basis, reflecting growth across channels.
  • Other Brands net revenues increased 10% on a reported basis and 5% on an organic basis. Dockers® increased 9% on a reported basis and 5% on an organic basis. Beyond Yoga® increased 10% on a reported basis and 4% on an organic basis.
• DTC (Direct-to-Consumer) net revenues increased 19% on a reported basis and 14% on an organic basis. DTC growth on an organic basis reflected an 11% increase in the U.S., a 17% increase in Europe and an 8% increase in Asia. Net revenues from e-commerce grew 19% on a reported and 14% on an organic basis. DTC comprised 45% of total organic net revenues in the fourth quarter.
• Wholesale net revenues increased 7% on a reported basis and 3% on an organic basis.

• Operating margin was 11.5% compared to 9.2% in Q4 2023. Adjusted EBIT margin increased 120 basis points to 13.4% from 12.2% last year due to gross margin expansion.
  • Gross margin increased 350 basis points to 61.3%, a company record, from 57.8% in Q4 2023 primarily driven by lower product costs, including savings from Project Fuel initiatives, favorable channel mix, and higher full price sales.
  • Selling, general and administrative (SG&A) expenses were $901 million compared to $798 million in Q4 2023. Adjusted SG&A was up 17.4% to $880 million compared to $750 million last year. As a percentage of sales, adjusted SG&A was 47.8% compared to 45.6% last year. The increase in SG&A versus prior year is primarily attributable to an increased investment in A&P, higher distribution expenses as a result of our DC transitions, and higher compensation incentives given performance in Q4 offset by leverage on selling expenses.
  • Restructuring charges were $14 million related to Project Fuel.
• Interest and other expenses, net, which include foreign exchange losses, were $12 million in the aggregate compared to $15 million in Q4 2023.
• The effective income tax rate was 8.6%, compared to 7.2% in Q4 2023.
• Net income was $183 million compared to $127 million in Q4 2023. Adjusted net income was $202 million compared to $179 million in Q4 2023.
• Diluted earnings per share was $0.46 compared to $0.32 in Q4 2023. Adjusted diluted earnings per share was $0.50 compared to $0.44 in Q4 2023.

Fiscal-year 2024 results are included in the company's Annual Report on Form 10-K for the year ended December 1, 2024.

Financial Highlights for the Full Year

• Reported net revenues of $6.4 billion were up 3% to FY 2023, and up 3% on an organic basis
• Gross margin was 60.0%; 310 basis points above FY 2023
• Operating margin was 4.2%; Adjusted EBIT margin was 10.2%, compared to 9.0% in FY 2023
• Net income was $211 million; Adjusted net income was $503 million, up from $441 million in FY 2023
• Diluted EPS was $0.52; Adjusted diluted EPS was $1.25, up from $1.10 in FY 2023
• Record Adjusted Free Cash Flow generation of $671 million
• The Company returned $289 million in capital to shareholders, up 45% to prior year

Additional information regarding Adjusted SG&A, Adjusted EBIT, Adjusted EBIT margin, Adjusted net income, Adjusted diluted earnings per share, Adjusted free cash flow as well as amounts presented on an organic net revenues basis and constant currency basis, all of which are non-GAAP financial measures, is provided at the end of this press release.

Balance Sheet Review as of December 1, 2024

• Cash and cash equivalents were $690 million, while total liquidity was approximately $1.5 billion.
• Total inventories decreased 4% on a dollar basis.

Shareholder Returns

In the fourth quarter, the company returned $51 million to shareholders in the form of dividends representing a dividend of $0.13 per share, up 8% from prior year, and share repurchases of approximately $30 million reflecting 1.6 million shares retired.

For the full year, the company returned $289 million to shareholders, a 45% increase over prior year, including:

• Dividends of $199 million, representing annual dividends of $0.50 per share, up 4% from prior year, and
• Share repurchases of $90 million reflecting 4.8 million shares retired.

As of December 1, 2024, the company had $590 million remaining under its current share repurchase authorization, which has no expiration date.

The company declared a dividend of $0.13 per share totaling approximately $51 million, payable in cash on February 28, 2025 to the holders of record of Class A common stock and Class B common stock at the close of business February 12, 2025.

Fiscal 2025 Guidance

The company is introducing organic net revenue guidance to better reflect the underlying growth of the company by excluding year-over-year non-comparable items. Fiscal 2025 organic net revenue guidance excludes the impacts from foreign exchange, divested businesses, acquisitions, and the lack of a 53^rd week.

The following guidance is provided for the year ending November 30, 2025:

• Reported net revenues: (1%) to (2%)
• Organic net revenues growth: 3.5% to 4.5%
• Adjusted EBIT margin: expanding to 10.9% to 11.1%
• Tax rate: approximately 23%
• Adjusted diluted EPS: $1.20 to $1.25. This includes an approximate 20c headwind from FX and a higher tax rate.

This outlook also assumes no significant worsening of macro-economic pressures on the consumer, inflationary pressures, supply chain disruptions, potential tariffs or currency fluctuations. A reconciliation of non-GAAP forward looking information to the corresponding GAAP measures cannot be provided without unreasonable efforts due to the challenge in quantifying various items including but not limited to, the effects of foreign currency fluctuations, taxes, potential tariffs, and any future restructuring, restructuring-related, severance and other charges.

Investor Conference Call

To access the conference call, please pre-register on https://register.vevent.com/register/BI27b55a4c75c84f9a9326293304a3b163 and you will receive confirmation with dial-in details. A live webcast of the event can be accessed on https://edge.media-server.com/mmc/p/njps4rwo.

A replay of the webcast will be available on http://investors.levistrauss.com starting approximately two hours after the event and archived on the site for one quarter.

About Levi Strauss & Co.

Levi Strauss & Co. (LS&Co.) is one of the world's largest brand-name apparel companies and a global leader in jeanswear. The company designs and markets jeans, casual wear and related accessories for men, women and children under the Levi's®, Levi Strauss Signature™, Denizen®, Dockers® and Beyond Yoga® brands. Its products are sold in approximately 120 countries worldwide through a combination of chain retailers, department stores, online sites, and a global footprint of approximately 3,400 retail stores and shop-in-shops. Levi Strauss & Co.'s reported 2024 net revenues were $6.4 billion. For more information, go to http://levistrauss.com, and for financial news and announcements go to http://investors.levistrauss.com.

Forward-Looking Statements

This press release and related conference call contains, in addition to historical information, forward-looking statements, including statements related to: progress against strategic priorities; the ongoing restructuring of our operations and our ability to achieve any anticipated cost savings associated with such restructuring; trajectory of direct-to-consumer business; macroeconomic conditions; impacts of foreign exchange; future financial results, including net revenues, adjusted EBIT margins, return on invested capital levels, adjusted SG&A, tax rate, and adjusted diluted EPS; capital expenditures; pricing initiatives; inventory growth; new store openings; investments in high growth initiatives; future dividend payments and share repurchases; and efforts to diversify product categories and distribution channels, and the related revenue projections. The company has based these forward-looking statements on its current reasonable assumptions, expectations and projections about future events. Words such as, but not limited to, "believe," "will," "may," "so we can," "when," "anticipate," "intend," "estimate," "expect," "project," "could" and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which are beyond our control, that could cause actual results to differ materially from those suggested by the forward-looking statements. Investors should consider the information contained in the company's filings with the U.S. Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K for fiscal 2024, especially in the "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Summary of Risk Factors" and "Risk Factors" sections. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release and related conference call may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of the date of this press release and related conference call. The company is not under any obligation and does not intend to update or revise any of the forward-looking statements contained in this press release and related conference call to reflect circumstances existing after the date of this press release and related conference call or to reflect the occurrence of future events, even if such circumstances or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

Non-GAAP Financial Measures

The company reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP) and the rules of the SEC. To supplement its financial statements prepared and presented in accordance with GAAP, the company uses certain non-GAAP financial measures, such as Adjusted SG&A, Adjusted SG&A margin, Adjusted EBIT (both reported and on a constant-currency basis), Adjusted EBIT margin (both reported and on a constant-currency basis), Adjusted net income (both reported and on a constant-currency basis), Adjusted diluted earnings per share (both reported and on a constant-currency basis), organic net revenues, Adjusted free cash flow, and return on invested capital to provide investors with additional useful information about its financial performance, to enhance the overall understanding of its past performance and future prospects and to allow for greater transparency with respect to important metrics used by management for financial and operating decision-making. The company presents these non-GAAP financial measures to assist investors in seeing its financial performance from management's view and because it believes they provide an additional tool for investors to use in computing the company's core financial performance over multiple periods with other companies in its industry. The tables found below present Adjusted SG&A, Adjusted SG&A margin, Adjusted EBIT (both reported and on a constant-currency basis), Adjusted EBIT margin (both reported and on a constant-currency basis), Adjusted net income (both reported and on a constant-currency basis), Adjusted diluted earnings per share (both reported and on a constant-currency basis), organic net revenues, Adjusted free cash flow, and return on invested capital and corresponding reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. Certain items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the company's financial position, results of operations and cash flows and should therefore be considered in assessing the company's actual financial condition and performance. Non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgment by management in determining how they are formulated. Some specific limitations include but are not limited to, the fact that such non-GAAP financial measures: (a) do not reflect cash outlays for capital expenditures, contractual commitments or liabilities including pension obligations, post-retirement health benefit obligations and income tax liabilities; (b) do not reflect changes in, or cash requirements for, working capital requirements; and (c) do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on indebtedness. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the company's financial results prepared in accordance with GAAP. The company urges investors to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures included in this press release, and not to rely on any single financial measure to evaluate its business. See "RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES" below for reconciliation to the most comparable GAAP financial measures. A reconciliation of non-GAAP forward looking information to the corresponding GAAP measures cannot be provided without unreasonable efforts due to the challenge in quantifying various items including but not limited to, the effects of foreign currency fluctuations, taxes, and any future restructuring, restructuring-related, severance and other charges.

Organic Net Revenues and Constant-Currency

The company reports net revenues on an organic net revenues basis in order to facilitate period-to-period comparisons of our revenues which excludes the impact of fluctuating foreign currency exchange rates from the change in reported net revenues, net revenues derived from business acquisitions or divestitures impacting the previous 12 months of the reporting date and the estimated impact of any 53^rd week. The company reports certain operating results on a constant-currency basis in order to facilitate period-to-period comparisons of its results without regard to the impact of fluctuating foreign currency exchange rates.

The term foreign currency exchange rates refers to the exchange rates used to translate the company's operating results for all countries where the functional currency is not the U.S. Dollar into U.S. Dollars. Because the company is a global company, foreign currency exchange rates used for translation may have a significant effect on its reported results. In general, the company's financial results are affected positively by a weaker U.S. Dollar and are affected negatively by a stronger U.S. Dollar as compared to the foreign currencies in which it conducts its business. References to operating results on a constant-currency basis mean operating results without the impact of foreign currency translation fluctuations.

The company calculates constant-currency amounts by translating local currency amounts in the prior-year period at actual foreign currency exchange rates for the current period. Constant-currency results do not eliminate the transaction currency impact, which primarily includes the realized and unrealized gains and losses recognized from the measurement and remeasurement of purchases and sales of products in a currency other than the functional currency and of forward foreign exchange contracts.

The company believes disclosure of organic net revenues and Adjusted EBIT constant-currency, Adjusted EBIT Margin constant-currency and Adjusted Net Income constant-currency results are helpful to investors because it facilitates period-to-period comparisons of its results by increasing the transparency of the underlying performance by excluding the impact of fluctuating foreign currency exchange rates. However, organic net revenues and constant-currency results are non-GAAP financial measures and are not meant to be considered in isolation or as a substitute for comparable measures prepared in accordance with GAAP. Organic net revenues and constant-currency results have no standardized meaning prescribed by GAAP, are not prepared under any comprehensive set of accounting rules or principles and should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. Organic net revenues and constant-currency results have limitations in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.

Source: Levi Strauss & Co. Investor Relations

The notes accompanying our consolidated financial statements in our Form 10-K are an integral part of these consolidated financial statements.

The notes accompanying our consolidated financial statements in our Form 10-K are an integral part of these consolidated financial statements.

The notes accompanying our consolidated financial statements in our Form 10-K are an integral part of these consolidated financial statements.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

FOR THE FOURTH QUARTER AND FISCAL YEAR 2024

The following information relates to non-GAAP financial measures, and should be read in conjunction with the investor call held on January 29, 2025, discussing the company's financial condition and results of operations as of and for the quarter and year ended December 1, 2024.

We define the following non-GAAP measures as follows:

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Adjusted Free Cash Flow:

We define Adjusted free cash flow, a non-GAAP financial measure, as net cash flow from operating activities less purchases of property, plant and equipment. We believe Adjusted free cash flow is an important liquidity measure of the cash that is available after capital expenditures for operational expenses and investment in our business. We believe Adjusted free cash flow is useful to investors because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet, invest in future growth and return capital to stockholders.

The following table presents a reconciliation of net cash flow from operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted free cash flow for each of the periods presented.

Return on Invested Capital:

We define Return on invested capital ("ROIC") as the trailing four quarters of Adjusted net income before interest and after taxes divided by the average trailing five quarters of total invested capital. We define total invested capital as total debt plus shareholders' equity less cash and short-term investments. We believe ROIC is useful to investors as it quantifies how efficiently we generated operating income relative to the capital we have invested in the business.

Our calculation of ROIC is considered a non-GAAP financial measure because we calculate ROIC using the non-GAAP metric Adjusted net income. Although ROIC is a standard financial metric, numerous methods exist for calculating a company's ROIC. As a result, the method we use to calculate our ROIC may differ from the methods used by other companies. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP.

The table below sets forth the calculation of ROIC for each of the periods presented.

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Organic Net Revenues and Constant-Currency:

The table below sets forth the calculation of net revenues by segment on an organic net revenues basis for the three-month and twelve-month periods ended December 1, 2024.

The table below sets forth the calculation of net revenues by channel on an organic net revenues basis for the three-month and twelve-month periods ended December 1, 2024.