Levi Strauss (LEVI 0.39%) is slated to report its second-quarter results for fiscal 2022 (which ended on May 29) after the market close on Thursday, July 7. An analyst conference call is scheduled for the same day at 5 p.m. ET.

The iconic denim and casual clothing retailer is heading toward its report on a mixed note. On the positive side, the company has been experiencing robust demand for its products because consumers have been refreshing their wardrobes. Many folks have been venturing out more often than they did during the height of the pandemic. Last quarter, once again, the company beat Wall Street's revenue and earnings expectations.

However, consumer confidence has dropped recently, as many people are feeling the pinch of surging inflation and sharply higher gas prices than a year ago. Consumers seem poised to tighten their spending on discretionary products, which include apparel and accessories.

There's also the market dynamics situation. Given the poor performance of the overall stock market this year, even a solid or strong earnings report might not propel Levi stock higher. That said, long-term investors should pay more attention to the performance of the company than to the stock's reaction to the earnings report.

Five adults and a young girl having a picnic in the park.

Image source: Getty Images.

Levi Strauss' key numbers

Metric Fiscal Q2 2021 Result Wall Street's Fiscal Q2 2022 Consensus Estimate Wall Street's Projected Change
Revenue $1.28 billion $1.43 billion 12%
Adjusted earnings per share (EPS) $0.23 $0.23 Flat

Data sources: Levi Strauss and Yahoo! Finance. Fiscal Q2 2022 ended May 29.

For context, last quarter, Levi's revenue jumped 22% year over year (26% in constant currency) to $1.59 billion. This result topped the $1.55 billion Wall Street had expected. By channel, wholesale's revenue grew 15% and direct-to-consumer (DTC) surged 35% year over year. Within the DTC channel, revenue from company-operated stores soared 48%, as more consumers returned to shopping at brick-and-mortar stores, while the company's e-commerce site posted revenue growth of 10% year over year.

Last quarter, net income according to generally accepted accounting principles (GAAP) was $196 million, or $0.48 per share, up 37% from the year-ago period. Adjusted for one-time items, earnings per share (EPS) jumped 35% to $0.46. That result surpassed the $0.42 analyst consensus estimate.

Supply chain issues and higher input costs

Last quarter (which included the holiday period), supply chain constraints resulted in Levi Strauss losing sales of about $60 million, according to management's estimate. In the prior quarter, this number was approximately $50 million.

It seems likely that the company's second-quarter results were hurt to some degree by the pandemic-driven global supply chain bottlenecks that have been plaguing many companies. Hopefully, investors will see an improvement in this issue.

The company has been offsetting higher input costs by increasing product prices. So far, higher prices have not seemed to dampen consumer demand.

Guidance

Any notable change in the company's fiscal year 2022 guidance would probably move the stock. For the year, management expects: 

  • Revenue of $6.4 billion to $6.5 billion, representing annual growth of 11% to 13%.
  • Adjusted EPS of $1.50 to $1.56, representing annual growth of about 2% to 6%.