"Our teams’ disciplined execution of our strategic priorities enabled us to deliver strong top and bottom-line growth as we capitalize on structural tailwinds and successfully manage a dynamic operating environment. The strength of our brands and strategy position us to deliver sustainable growth well into the future." 

Financial Highlights for the First Quarter

• Reported net revenues of $1.6 billion up 22%, and 26% on a constant-currency basis, versus Q1 2021 driven by strong growth across all geographical segments

- Global Direct-to-Consumer reported net revenues up 35% versus Q1 2021; reflecting a 48% increase in company-operated stores and a 10% increase in e-commerce

- Global Wholesale reported net revenues up 15% versus Q1 2021

- Net revenues through all digital channels grew 16% and represented approximately 25% of total ?first quarter net revenues

- Supply chain constraints impacted net revenues by approximately $60 million

• Gross margin was 59.3%; Adjusted gross margin was 59.4%, up 170 basis points from Q1 2021

• Operating margin was 14.7%; Adjusted EBIT margin of 14.9%, up from 13.3% in Q1 2021

• Net income was $196 million; Adjusted net income was $189 million up from $140 million in Q1 2021

• The effective income tax rate was 20.4% compared to 7.9% in Q1 2021

• Diluted EPS was $0.48; Adjusted diluted EPS was $0.46, up from $0.34 in Q1 2021

"We achieved excellent financial results in the first quarter, driving strong double-digit revenue growth and record gross margin enabling us to deliver adjusted EBIT margin of 14.9 percent," said Harmit Singh, chief financial officer of Levi Strauss & Co. "The ongoing consumer demand across our portfolio of brands and our proven ability to deliver profitable growth give us the confidence to reaffirm our full-year outlook despite the incremental headwinds from ongoing macro challenges."

Highlights include:

First-Quarter 2022 Details:

• Net revenues of $1.6 billion increased 22% on a reported basis, and 26% on a constant-currency basis excluding $38 million in unfavorable currency impacts.

–  DTC net revenues increased 35%, driven by both company-operated stores and e-commerce. As a percentage of first quarter company net revenues, sales from DTC stores and e-commerce comprised 30% and 9%, respectively, for a total of 39%.

–  Wholesale net revenues increased 15% reflecting strong demand for the Levi's® brand globally.

–  The company’s global digital net revenues grew approximately 16% compared to the same period ?in the prior year and comprised approximately 25% of first quarter fiscal 2022 net revenues.

• Gross profit was $944 million, as compared to $760 million in the same quarter in the prior year. Gross margin was 59.3% of net revenues, up from 58.2% in the same quarter of the prior year. Adjusted gross margin, which excludes COVID-19 and acquisition-related charges, was 59.4%, an increase of 170 basis points compared to the same period in the prior year. The increase in gross margin reflects a higher proportion of sales in our DTC channel, lower promotions, higher share of full price sales and price increases, partially offset by higher product costs.

• Selling, general and administrative (SG&A) expenses were $709 million compared to $583 million in the same quarter in the prior year. Adjusted SG&A in the first quarter of fiscal 2022 was $708 million compared to $579 million in the same quarter in the prior year. As a percentage of net revenues, adjusted SG&A was 44.5%, approximately 20 basis points higher than the prior year period, reflecting higher investments in advertising and promotion and higher distribution expenses, partially offset by leverage in selling expenses.

• Operating income of $234 million compared to $177 million in the same quarter in the prior year. Adjusted EBIT of $238 million compared to $174 million in the same quarter of the prior year. The increases were primarily due to higher net revenues and gross margin partially offset with higher SG&A expenses in the current year.

• Net income was $196 million compared to $143 million in the same quarter of the prior year and Adjusted net income was $189 million compared to $140 million in the same quarter of the prior year. The company recognized lower interest expense offset with higher income taxes. Additionally, the company recognized a COVID-19 government subsidy gain within net income in the current year.

• The effective income tax rate was 20.4% for the first quarter, compared to 7.9% for the same prior-year period. The increase in the effective tax rate was primarily driven by lower tax benefit from the foreign derived intangible income deduction and stock-based compensation equity awards in the quarter as compared to the same prior-year period.

• Adjusted diluted earnings per share increased to $0.46 as compared to $0.34 for the same prior-year period.

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

First-Quarter Segment Overview

Reported net revenues and operating income for the quarter are set forth in the table below:

• In the Americas, net revenues grew 26% on a reported basis and 27% on a constant-currency basis, driven by growth across both our DTC and wholesale channels. DTC net revenues increased 31% due to strength in company-operated stores as consumers returned to in-person shopping. Wholesale net revenues grew 24%, driven by strong performance across brands, particularly the Levi’s® brand. Net revenues through all digital channels grew 24% and represented 24% of the segment's sales in the quarter. Operating income for the segment increased due to higher net revenues and gross margins.

• In Europe, net revenues grew 13% on a reported basis and 21% on a constant-currency basis. DTC net revenues increased 46%, driven by strength in company-operated stores as the severity of the pandemic lessened, allowing consumers to return to our stores. Wholesale net revenues decreased 4% on a reported basis while increasing 3% on a constant-currency basis. Net revenues through all digital channels declined 8% following an 84% increase in the same period last year and represented 29% of the segment's sales in the quarter. ?Operating income for the segment increased due to higher net revenue and gross margins, partially offset by higher SG&A expenses as a percentage of net revenues.

• In Asia, net revenues increased 11% on a reported basis and 14% on a constant-currency basis. The increase in net revenues was driven by both our DTC and wholesale channels and most markets, despite a few markets continuing to experience COVID-related impacts. DTC net revenues increased 17% driven by strong performance in our company-operated stores, as well as e-commerce, which was up 22%. Wholesale net revenues increased 5% driven by strength of the Levi’s® brand across several markets. Net revenues through all digital channels grew 17% and represented 14% of the segment's sales in the quarter. Operating income for the region increased due to higher net revenue, gross margin, and lower SG&A expenses as a percentage of net revenues.

• For Other Brands, Dockers® and Beyond Yoga® combined, net revenues and operating income increased, reflecting growth across channels for the Dockers® brand, and the acquisition of Beyond Yoga®, which had net revenues of approximately $26 million.