American Retail Is Not Good. Cowboy Giant Levi's Will Slow Down In The Second Half Of The Year.

The second earnings report of Levi 's Levi's Levi Strauss & Co. (NYSE:LEVI) has not only shown that profits have been eroded, but is also expected to slow down in the second half of the fiscal year.

Levi Strauss & Co. (NYSE:LEVI) was rushed into the market early on Wednesday for a maximum of 12.7% to 20.65 dollars, ending the six consecutive trading day's rally, the largest ever decline.

The group's chief financial officer, Harmit Singh, pointed out at a conference call of analysts that the wholesale market in the two quarter, the largest market in the US, fell by 2% over the past year due to retailers' closing down and bankruptcies. This is the first time in the past year and a half that the group's global 1/3 revenue has regressed. Management also expects that the weak retail environment in the second half of the fiscal year, the continuous closing of stores and the pressure of the customer shopping budget will continue to pressure wholesale sales. "The second half will be slightly worse than the first half," chief executive ChipBergh told analysts.

In addition, because the fiscal year ended before black Friday, and last fiscal year's performance included black Friday, this would have negative impact on the whole year's revenue by 100 basis points.

In the two quarter of May 26th, Levi Strauss & Co. achieved an income of US $1 billion 313 million, up 5.4% from 1 billion 246 million US dollars in the same period last year, which is in line with market expectations. Excluding the exchange rate impact, the increase was 9%. In the three major regional markets, the fixed exchange rate growth rate in the United States slowed sharply from 4% in the first quarter to 4% in the first quarter, while in Europe it increased significantly to 18% and Asia also increased by 12%.

Chip Bergh pointed out that although China's revenue increased by 3% in the two quarter, although it was positive in DTC (directly to consumers) and electricity supplier channels, its potential was far from being realized, and the main emerging markets such as India, Russia and Brazil had achieved double-digit growth.

In response to analysts' questions, Chip Bergh said that China currently contributes only 3% of its revenue to Levi Strauss & Co., but it accounts for 20% of the global apparel market. Over the past year and a half, the group has closed down the loss stores in the local franchise channels, and has cleared up the inventory. But the franchise network continues to drag China's overall performance, so the two quarter has only 3% growth.

He also revealed that the board of directors of the group has been divided into three groups to inspect Hangzhou, Shanghai and Wuhan (soon to cooperate with the best dealers to open the largest Levi 's flagship store in China). After that, the board of directors of the group held a meeting of the board of directors in Wuhan to review the China strategy. "I am very confident about the local team and strategy," Chip Bergh told analysts. The Chinese market is expected to accelerate in the next 12 months. He pointed out that local direct business has been speeding up in the two quarter, which proves that Sino US trade relations have not caused consumers or media to discriminate between Levi s Levi's or other classic American brands.

Harmit Singh increased the proportion of income from DTC, women's wear and top coat to 39%, 32% and 21% respectively, and the data of 14%, 16% and 14% growth recorded in the two quarter. This is a corroboration of LeviStrauss & Co.'s strong trend of diversification development based on the three core areas of wholesale, men's and jeans.

Chip Bergh revealed that Levi 's Levi's's mobile app will be launched before the end of the fiscal year, while the sales of 501 denim hot pants increased by 50% during the Coachella Music Festival, and the launch of the collaboration series with the record breaking word of mouth Stranger Things (the weird story) is an example of the brand's successful marketing for young consumers such as the millennial generation and Z generation.

With the increase in advertising and marketing costs, the SG&A expenditure in the two quarter increased by 7.4% to $637 million 500 thousand compared to the previous year, while operating profit decreased by 18.6% to $62 million 900 thousand per annualized year. Net profit dropped to $28 million 230 thousand from $74 million 930 thousand in the same period last year, and EPS plunged from $0.19 to $0.07, mainly due to the $29 million cost of IPO in March. The adjusted EPS is US $0.17, which is better than the market expectation of US $0.13.

Management has now raised the outlook for annual fixed exchange rate revenue growth from a "median" to a "median upper limit" and estimated that the adjusted EBIT profit margin will increase by 10 basis points per annualized year.

Levi Strauss & Co. (NYSE:LEVI) was landed at the NYSE at $17 per share in March 21st, giving the world famous jeans brand its parent company's market value of US $6 billion 600 million. As of July 10th, it was closed at $23.66, and Levi Strauss &Co. (NYSE:LEVI) has recorded an increase of 39.2%, with a market capitalization of 9 billion 300 million US dollars.

Wall Street analysts have generally approved the group's active development in most fields, especially the main growth engines (DTC, women's clothing and tops). Morgan Stanley Morgan Stanley analyst Kimberly Greenberger believes that the continued expansion of DTC business, the improvement of IT and supply chain, and the strategy of raising prices will help push forward the two quarter because of the strong US dollar and product investment and far less than the market expected gross profit margin.

In a research report last month, Bain & Co. Bain pointed out that famous brands, represented by Levi 's Levi's, on product design and development, while lacking in logistics and analysis scale, will continue to benefit from the rapid development of Amazon.com Inc. (NASDAQ:AMZN), Amazon, Alibaba Group Holding Ltd. (Alibaba) and WeChat and other platforms.

J.P. Morgan Chase & Co. Morgan chase, Citigroup Inc. Citigroup and Guggenhein analysts all give / maintain LeviStrauss / Co. (NYSE:LEVI) equivalent to the "buy" rating.