Levi Strauss (LEVI -0.04%) went public last month following a solid year for the 165-year-old apparel company. Levi booked double-digit revenue and operating income growth in 2018, driven mostly by soaring sales of products other than men's bottoms.

That momentum carried over into the first quarter of 2019 for Levi. Revenue was up by a double-digit percentage on a constant-currency basis, and adjusted operating income grew at an even quicker pace. The company's guidance for the full year was a little less impressive, but Levi still sees revenue and earnings marching higher in 2019.

Levi executives at the New York Stock Exchange.

Image source: Levi Strauss.

A solid first quarter

With about half of Levi's revenue coming from Europe and Asia, currency fluctuations reduced the company's revenue growth rate during the first quarter. On a constant-currency basis, revenue was up 11% year over year, while adjusted operating income was up 21%. Here are the company's as-reported results:


Q1 2019

Q2 2018

Change (YOY)


$1.44 billion

$1.34 billion


Adjusted operating income

$206 million

$180 million


Adjusted net income

$151 million

$83 million


Data source: Levi Strauss.

Levi's revenue growth was driven by both the wholesale business and the direct-to-consumer business. Wholesale revenue totaled $869.3 million, up 5% year over year, while direct-to-consumer revenue jumped 9.6% to $565.1 million. Direct-to-consumer revenue includes sales at Levi's company-operated stores, company-operated shop-in-shops located in third-party retail stores, and company-operated e-commerce sites .

As of Feb. 24, Levi's operated 832 stores and about 500 shop-in-shops. The company has added 70 stores over the past year, and it plans to open nearly 100 new stores in fiscal 2019.

Levi's revenue also grew across its three geographic regions. Americas revenue was $717 million, up 9% year over year; European revenue was $465 million, up 3% year over year; and Asia revenue was $253 million, up 8% year over year. All three regions also saw increases in operating income.

Levi's adjusted operating income growth was driven by higher revenue and a reduction in operating expenses as a percentage of revenue. However, adjusted net income soared primarily due to a $37 million charge related to undistributed foreign earnings in the prior-year period.

Decent guidance

The first quarter marked the sixth consecutive quarter of double-digit constant-currency revenue growth for Levi, but it looks like that streak will soon come to an end. The company expects to produce mid-single-digit constant-currency revenue growth in fiscal 2019, implying a slowdown for the rest of the year.

The timing of the end of fiscal 2019 will reduce revenue growth a bit. Fiscal 2019 won't contain Black Friday this year, which Levi's expects to reduce revenue by about half of a percentage point. Adjusted operating margin is expected to be flat to slightly up this year.

Levi's strategy is to branch out beyond its core men's bottoms business by increasing sales of tops and women's apparel. That plan is working so far, but the company's track record over the past 20 years should give investors some pause. Levi's annual revenue is still well below its peak revenue in the mid-1990s, and the apparel business is arguably more competitive today than it's ever been. Throw in disruption from e-commerce, and the path ahead for Levi is far from smooth.

Levi did what it needed to do for its first quarterly report as a publicly traded company. Whether it can keep up its momentum in the coming years, rather than fall back into a malaise, remains to be seen.