Levi Strauss & Co (NYSE:LEVI) Q2 2019 Earnings Conference Call Transcript

Jul 09, 2019 • 05:00 pm ET


Levi Strauss & Co (NYSE:LEVI) Q2 2019 Earnings Conference Call Transcript


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Harmit J. Singh

have been guiding full year revenue growth in the mid-single digits. We now expect to deliver at the high end of that range. Growth will be broad based with all regions and channels growing. While underlying business trends remain positive, there are few reasons we expect second half sales growth to moderate relative to the first half, particularly in the United States.

First, the lack of a Black Friday in Q4, which we expect will adversely impact the second half by roughly a 100 basis point. Additionally, we anticipate that pressure in the wholesale channel will adversely impact us by roughly 200 basis points in the second half due to the bankruptcies and door closures since a year ago. The overall softening U.S. wholesale environment and the lower off-price channel sales reflecting our healthier inventory position. We reaffirm our expectation that gross margin and SG&A as a percentage of revenue will both be slightly up on a constant currency basis, primarily reflecting continued growth and investment in the direct-to-consumer channel. And given our strong first half performance, we now expect constant currency adjusted EBIT margin to be slightly up to prior year in the range of 10 basis points. This is despite an adverse full year impact of 25 basis points due to the absence of Black Friday.

Finally, we now expect the lower effective tax rate for the full year of around 21%. With respect to currency, we anticipate that the unfavorable currency translation impact to revenue and adjusted EBIT will be much less significant in the second half of the year. We now expect full year unfavorable impacts of 250 and 400 basis points to our revenues and adjusted EBIT growth rates, respectively.

Before turning to Q&A, I want to take a moment to discuss the potential impact of tariffs. Tariffs have been on-again, off-again recently, and it's difficult to predict what the future holds for tariff policy. But as we have previously communicated, we have taken steps to insulate our business from the long-term negative impact of these kind of measures should additional tariffs been enacted on imports to the U.S. from China and Mexico, we can mitigate the financial impact to our business over the near term.

With that, we'll take your questions.