Levi Strauss & Co. (NYSE:LEVI) Q1 2023 Earnings Call Transcript

On Europe, specifically, Europe revenues were up 2%. I think we said this in the prepared remarks that up 6%, excluding Russia, sequentially improving versus last quarter, again, driven by the strength of DTC, which was up 16%, excluding Russia. Comps were positive every month across North and South Europe. They were also positive in the quarter in mainline and outlet stores as well as e-commerce. Every market in Europe grew with the exception of a couple of the smaller markets in the Nordics. Our largest markets, France, U.K., Germany, were all collectively up low single digits. Spain and Italy were up double digits. So Europe is doing a little bit better than what we thought it was going to do going into the year and — but it’s still kind of in the range of what we guided originally.

I guess the last thing I would say about Europe, just like the U.S., we’re pretty cautious about our wholesale business there. As retailers are playing their open-to-buy budgets pretty close to their best given all of the macroeconomic uncertainty.

Harmit Singh: And Matt, your question about any change in pricing strategy, if the question behind the question is are we taking prices down? No, that’s not what’s happening. But we’re not necessarily pricing up in today’s environment. And so, we’re promoting smartly, like most retailers. We’re not necessarily number one in promotions. We are competitive, but we’re not necessary one. And we’ve got a lot of newness in our assortment. And so, that’s why — how we are attracting traffic, et cetera, where we can price, for example, the organic stuff that we bring in, we price thoughtfully. But overall, we’re being mindful of the fact that the consumer generally especially in the western part of the world are just a tight on spending.

Operator: Thank you. Our next question comes from the line of Jay Sole of UBS. Please go ahead, Jay.

Jay Sole: Harmit, I heard you say you expect SG&A dollars to be up mid-single digits in Q2. I’m not sure I caught what you expect SG&A dollars to do for the full year and how that impacts your operating margin guidance. Is it possible — could you just expand on that a little bit for us, please?

Harmit Singh: Yes. I would say low single- to mid-single on a full year basis. And largely, the way we are thinking about SG&A, Jay, is wherever we can cut discretionary expenses, we are. We have really tightened new hires, we have tightened things like travel, and this is business critical, et cetera, et cetera. I think where we’re spending the dollars is as we open new doors, we’ll have on a net basis, 80 doors this year between our three brands and that is going to fuel the direct-to-consumer business, which is important. Advertising a little bit, especially with the 501 campaign and on basic infrastructure, like the ERP, which is being implemented as we speak in the U.S. as well as the distribution capacity that we’re gearing up for the long term. So, I think those are the areas where the spending is, which drives a little bit of the SG&A, but where we can tighten we’ll continue to tighten.

Operator: Thank you. Our next question — one moment. Pardon me. Our next question comes from the line of Ike Boruchow of Wells Fargo. Your question please, Ike.

Ike Boruchow: Maybe Harmit, can you talk a little bit more about the implications the ERP has had on U.S. wholesale? Just maybe specifically, can you quantify the dollars that were pulled forward into the first quarter and the dollars that will be pulled out of the second quarter? Maybe specifically, could you give us embedded in that down high single to low double, what is the U.S. wholesale decline planned in 2Q? And then any other color on U.S. wholesale, whether it’s order books or planned in the back half, it would also be great.