Q3 Net Revenues in Line With Prior Year,
With 14% Growth in Global DTC
Gross Margin of 55.6% Exceeded Q3
Outlook
Continued Sequential Improvement in
Inventory; Up 1% to Prior Year on a Comparable Basis
Diluted EPS of $0.02 and Adj. Diluted EPS of
$0.28
Company Expects FY Adj. Diluted EPS at Low
End of Previously Guided $1.10-$1.20 Range
Levi Strauss & Co. (NYSE: LEVI) today announced financial
results for the third quarter ended August 27, 2023.
“In the third quarter, we delivered double-digit growth in our
direct-to-consumer business, driven by strong comp-store gains,
which helped offset continued softness in the wholesale channel,
primarily in the U.S.,” said Chip Bergh, president and chief
executive officer of Levi Strauss & Co. “We are focused on
the levers within our control and the actions we took in the third
quarter are beginning to drive improvements in US wholesale trends.
As we look longer term, we remain confident in our ability to
achieve our goals given the global strength of the Levi’s brand,
the momentum in our direct-to-consumer business globally, and the
exceptional growth potential of our product portfolio and our
international business.”
“We delivered Adjusted EBIT and Adjusted diluted EPS in line
with our expectations while navigating a challenging operating
environment,” said Harmit Singh, chief financial and growth
officer of Levi Strauss & Co. “While we saw sequential
improvement in the business across the company as we moved through
Q3 with both July and August up versus prior year, given the
ongoing uncertainty in the macro environment, we are taking a
cautious approach to our outlook for the fourth quarter. As we
accelerate our transition to a DTC-led company, we have commenced
an initiative to review our operating model and cost structure that
should drive agility and material cost savings beginning in
2024.”
Financial Highlights
- Net Revenues of $1.5 billion were consistent with the
prior year on a reported basis and 2% lower on a constant-currency
basis versus Q3 2022.
- DTC (Direct to Consumer) net revenues increased 14% on a
reported basis and 13% on a constant-currency basis, driven by
broad-based growth in both company-operated mainline and outlet
stores and e-commerce. Revenues from e-commerce grew 19% on a
reported basis and 18% on a constant-currency basis reflecting
double-digit growth across all brands. As a percentage of third
quarter net revenues, DTC comprised 40% of total net revenues.
- Wholesale net revenues declined 8% on a reported basis
and 10% on a constant-currency basis as growth in Asia and Latin
America was offset by declines in North America and Europe.
- In the Americas, net revenues decreased 5% on a reported
basis and 7% on a constant-currency basis. DTC net revenues
increased 12% on a reported basis and 11% on a constant-currency
basis driven by company-operated mainline and outlet stores and
e-commerce. Wholesale net revenues decreased 12% on a reported
basis and 14% on a constant-currency basis as softness in North
America was partially offset by growth in Latin America.
- In Europe, net revenues decreased 2% on a reported basis
and 6% on a constant-currency basis; excluding Russia, net revenues
decreased 3% on a constant-currency basis. DTC net revenues
increased 10% on a reported basis and 6% on a constant-currency
basis, and 11% excluding Russia, driven by company-operated
mainline and outlet stores and e-commerce. Wholesale net revenues
decreased 10% on a reported basis and 14% on a constant-currency
basis, reflecting the cautious order environment among wholesale
partners.
- Asia net revenues increased 12% on a reported basis and
18% on a constant-currency basis, reflecting growth across almost
all markets, including strong growth in China. DTC net revenues
rose 15% on a reported basis and 23% on a constant-currency basis,
driven by strength in company-operated mainline and outlet stores
and e-commerce. Wholesale net revenues increased 8% on a reported
basis and 13% on a constant-currency basis.
- Other Brands net revenues increased 12% on a reported
basis and 9% on a constant-currency basis. Dockers® increased 9% on
a reported basis and 5% on a constant-currency basis as strong
growth internationally and in DTC was partially offset by U.S.
wholesale. Beyond Yoga® rose 25% on reported and constant-currency
bases.
Net Revenues
Operating Income
Three Months Ended
% Increase (Decrease)
Three Months Ended
% Increase (Decrease)
($ millions)
August 27, 2023
August 28, 2022
As
Reported
Constant
Currency
August 27, 2023
August 28, 2022
As
Reported
Constant
Currency
Americas
$
767
$
805
(5
)%
(7
)%
$
136
$
177
(23
)%
(25
)%
Europe
$
384
$
390
(2
)%
(6
)%
$
68
$
84
(19
)%
(22
)%
Asia
$
246
$
221
12
%
18
%
$
30
$
20
51
%
66
%
Other Brands
$
114
$
101
12
%
9
%
$
(2
)
$
2
(175
)%
(161
)%
- Operating margin of 2.3% was down from 13.1% in Q3 2022
as a result of higher SG&A expenses and an impairment charge of
$90.2 million related to the Beyond Yoga® acquisition, and lower
net revenues and gross margin. Adjusted EBIT margin declined
330 basis points to 9.1% from 12.4% last year due to gross margin
contraction and SG&A deleverage due to higher DTC
expenses.
- Gross margin was down 130 basis points to 55.6% from
56.9% in Q3 2022. Adjusted gross margin was down 130 basis
points to 55.6% from 56.9% last year. The decline in Gross margin
and Adjusted gross margin was driven by lower full-price sales,
strategic pricing actions and higher product costs. These impacts
were partially offset by favorable channel and geographic mix, as
well as lower air freight expenses and favorable currency
exchange.
- Selling, general and administrative (SG&A) expenses
were $715 million compared to $664 million in Q3 2022. Adjusted
SG&A was $702 million compared to $675 million last year,
reflecting higher planned expenses to support DTC expansion.
- Interest and other expenses, which include foreign
exchange losses, were $38 million compared to $13 million in Q3
2022. The increase in expenses was primarily driven by a $19
million pension settlement loss and foreign currency transaction
losses reflecting the impact of rate fluctuations on foreign
denominated balances.
- The effective tax rate was 386.6% compared to 7.2% in Q3
2022. The increase in the effective tax rate is primarily driven by
the foreign-derived intangible income deduction on a proportion to
losses before income taxes. Additionally, the non-cash impairment
charge related to the Beyond Yoga® acquisition resulted in an
income tax benefit of $22 million. Excluding the impact of the
impairment, the tax rate would be 10% for Q3 2023.
- Net income was $10 million compared to net income of
$173 million in Q3 2022. Adjusted net income was $112
million compared to $161 million in Q3 2022.
- Diluted earnings per share was $0.02 compared to diluted
earnings per share of $0.43 in Q3 2022. The recognition of the
Beyond Yoga® impairment unfavorably impacted diluted earnings per
share by $0.17, net of tax. Adjusted diluted earnings per
share was $0.28 compared to $0.40 in Q3 2022.
Three Months Ended
Decrease
As Reported
Decrease
Constant
Currency
Nine Months Ended
Decrease
As Reported
Increase (Decrease)
Constant
Currency
($ millions, except per-share amounts)
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
Net revenues
$
1,511
$
1,517
—
%
(2
)%
$
4,537
$
4,580
(1
)%
—
%
Net income
$
10
$
173
(94
)%
(95
)%
$
123
$
419
(71
)%
(70
)%
Adjusted net income
$
112
$
161
(31
)%
(33
)%
$
262
$
467
(44
)%
(44
)%
Adjusted EBIT
$
138
$
188
(27
)%
(29
)%
$
355
$
571
(38
)%
(38
)%
Diluted earnings per share
$
0.02
$
0.43
(41) ¢
(41) ¢
$
0.31
$
1.03
(72) ¢
(72) ¢
Adjusted diluted earnings per share
$
0.28
$
0.40
(12) ¢
(14) ¢
$
0.65
$
1.15
(50) ¢
(51) ¢
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.
Balance Sheet Review as of August 27, 2023
- Cash and cash equivalents were $295 million, while total
liquidity was approximately $1.1 billion.
- The company’s leverage ratio was 1.6 as compared to 1.1
at the end of Q3 2022.
- Total inventories increased 6% on a dollar basis.
Approximately 5% of the year-over-year increase is due to the
modification of terms with the majority of our suppliers that
results in the company taking ownership of inventory for goods
being brought into the Americas closer to the point of shipment
rather than destination. This is consistent with existing terms for
goods sent to Europe and Asia. The remaining 1% increase represents
a 17 point improvement from last quarter and reflects U.S.
inventory levels below prior year’s level . We continue to expect
sequential progress, achieving total company inventory levels below
prior year levels by year end.
Additional information regarding leverage ratio, which is a
non-GAAP financial measure, is provided at the end of this press
release.
Shareholder Returns
- The company returned approximately $48 million to shareholders
in the third quarter, in dividends representing $0.12 per share, in
line with Q3 2022.
- The company did not repurchase any shares in the quarter. At
quarter end, the company had $680 million remaining under its
current share repurchase authorization, which has no expiration
date.
- The company declared a dividend of $0.12 per share, totaling
approximately $48 million. The dividend is payable in cash on
November 9, 2023 to the holders of record of Class A common stock
and Class B common stock at the close of business October 26,
2023.
Fiscal 2023 Guidance
- Reported net revenues are expected flat to up 1%
year-over-year.
- Adjusted diluted EPS is expected to be on the low-end of the
previously guided range of $1.10 to $1.20.
- More details will be provided during the earnings conference
call.
This outlook also assumes no significant worsening of
macro-economic pressures on the consumer, inflationary pressures,
supply chain disruptions, or currency impacts. A reconciliation of
non-GAAP forward looking information to the corresponding GAAP
measures cannot be provided without unreasonable efforts due to the
challenge in quantifying various items including but not limited
to, the effects of foreign currency fluctuations, taxes, and any
future restructuring, restructuring-related, severance and other
charges.
Investor Conference Call
To access the conference call, please pre-register on
https://register.vevent.com/register/BId9d37e55f1db47b8b1d5249cd2eb2ef4
and you will receive confirmation with dial-in details. A live
webcast of the event can be accessed on
https://edge.media-server.com/mmc/p/685esjao/.
A replay of the webcast will be available on
http://investors.levistrauss.com starting approximately two hours
after the event and archived on the site for one quarter.
About Levi Strauss & Co.
Levi Strauss & Co. is one of the world's largest brand-name
apparel companies and a global leader in jeanswear. The company
designs and markets jeans, casual wear and related accessories for
men, women and children under the Levi's®, Dockers®, Signature by
Levi Strauss & Co.™, Denizen® and Beyond Yoga® brands. Its
products are sold in more than 110 countries worldwide through a
combination of chain retailers, department stores, online sites,
and a global footprint of approximately 3,200 brand-dedicated
stores and shop-in-shops. Levi Strauss & Co.'s reported 2022
net revenues were $6.2 billion. For more information, go to
http://levistrauss.com, and for financial news and announcements go
to http://investors.levistrauss.com.
Forward Looking Statements
This press release and related conference call contain, in
addition to historical information, forward-looking statements,
including statements related to: future financial results,
including the company's expectations for the full fiscal year 2023
net revenues, adjusted diluted earnings per share and effective tax
rate; inflationary pressures; fluctuations in foreign currency
exchange rates; global economic conditions; supply chain
constraints and disruptions; future dividend payments; future share
repurchases; performance of our wholesale and DTC businesses;
future inventory levels and our ability to execute against our
long-term business strategies. The company has based these
forward-looking statements on its current assumptions, expectations
and projections about future events. Words such as, but not limited
to, “believe,” “will,” “so we can,” “when,” “anticipate,” “intend,”
“estimate,” “expect,” “project” and similar expressions are used to
identify forward-looking statements, although not all
forward-looking statements contain these words. These
forward-looking statements are necessarily estimates reflecting the
best judgment of senior management and involve a number of risks
and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements.
Investors should consider the information contained in the
company's filings with the U.S. Securities and Exchange Commission
(SEC), including its Annual Report on Form 10-K for fiscal year
2022 and its Quarterly Reports on Form 10-Q for the quarter ended
August 27, 2023, especially in the “Management's Discussion and
Analysis of Financial Condition and Results of Operations” and
“Risk Factors” sections. Other unknown or unpredictable factors
also could have material adverse effects on future results,
performance or achievements. In light of these risks,
uncertainties, assumptions and factors, the forward-looking events
discussed in this press release and related conference call may not
occur. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date stated
or, if no date is stated, as of the date of this press release and
related conference call. The company is not under any obligation
and does not intend to update or revise any of the forward-looking
statements contained in this press release and related conference
call to reflect circumstances existing after the date of this press
release and related conference call or to reflect the occurrence of
future events, even if such circumstances or future events make it
clear that any expected results expressed or implied by those
forward-looking statements will not be realized.
Non-GAAP Financial Measures
The company reports its financial results in accordance with
generally accepted accounting principles in the United States
(GAAP) and the rules of the SEC. To supplement its financial
statements prepared and presented in accordance with GAAP, the
company uses certain non-GAAP financial measures, such as Adjusted
gross profit, Adjusted gross margin, Adjusted SG&A, Adjusted
SG&A margin, Adjusted EBIT (both reported and on a
constant-currency basis), Adjusted EBIT margin (both reported and
on a constant-currency basis), Adjusted EBITDA, Adjusted net income
(both reported and on a constant-currency basis), Adjusted net
income margin, Adjusted diluted earnings per share (both reported
and on a constant-currency basis), constant-currency net revenues,
net debt, leverage ratio, Adjusted free cash flow and return on
invested capital to provide investors with additional useful
information about its financial performance, to enhance the overall
understanding of its past performance and future prospects and to
allow for greater transparency with respect to important metrics
used by management for financial and operating decision-making. The
company presents these non-GAAP financial measures to assist
investors in seeing its financial performance from management's
view and because it believes they provide an additional tool for
investors to use in computing the company's core financial
performance over multiple periods with other companies in its
industry. The tables found below present Adjusted gross profit,
Adjusted gross margin, Adjusted SG&A, Adjusted EBIT (both
reported and on a constant-currency basis), Adjusted EBIT margin
(both reported and on a constant-currency basis), Adjusted net
income (both reported and on a constant-currency basis), Adjusted
net income margin (both reported and on a constant-currency basis),
Adjusted diluted earnings per share (both reported and on a
constant-currency basis), constant-currency net revenues, net debt,
leverage ratio, Adjusted free cash flow, and return on invested
capital, and corresponding reconciliations of these non-GAAP
financial measures to the most directly comparable financial
measures calculated in accordance with GAAP. Non-GAAP financial
measures have limitations in their usefulness to investors because
they have no standardized meaning prescribed by GAAP and are not
prepared under any comprehensive set of accounting rules or
principles. Certain items that may be excluded or included in
non-GAAP financial measures may be significant items that could
impact the company’s financial position, results of operations and
cash flows and should therefore be considered in assessing the
company’s actual financial condition and performance. Non-GAAP
financial measures are subject to inherent limitations as they
reflect the exercise of judgment by management in determining how
they are formulated. Some specific limitations include but are not
limited to, the fact that such non-GAAP financial measures: (a) do
not reflect cash outlays for capital expenditures, contractual
commitments or liabilities including pension obligations,
post-retirement health benefit obligations and income tax
liabilities; (b) do not reflect changes in, or cash requirements
for, working capital requirements; and (c) do not reflect the
interest expense, or the cash requirements necessary to service
interest or principal payments, on indebtedness. In addition,
non-GAAP financial measures may be calculated differently from, and
therefore may not be directly comparable to, similarly titled
measures used by other companies. As a result, non-GAAP financial
measures should be viewed as supplementing, and not as an
alternative or substitute for, the company's financial results
prepared in accordance with GAAP. The company urges investors to
review the reconciliation of these non-GAAP financial measures to
the most directly comparable GAAP financial measures included in
this press release, and not to rely on any single financial measure
to evaluate its business. See “RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES” below for reconciliation to the most comparable
GAAP financial measures. A reconciliation of non-GAAP forward
looking information to the corresponding GAAP measures cannot be
provided without unreasonable efforts due to the challenge in
quantifying various items including but not limited to, the effects
of foreign currency fluctuations, taxes, and any future
restructuring, restructuring-related, severance and other
charges.
Constant-currency
The company reports certain operating results on a
constant-currency basis in order to facilitate period-to-period
comparisons of its results without regard to the impact of
fluctuating foreign currency exchange rates. The term foreign
currency exchange rates refers to the exchange rates used to
translate the company's operating results for all countries where
the functional currency is not the U.S. Dollar into U.S. Dollars.
Because the company is a global company, foreign currency exchange
rates used for translation may have a significant effect on its
reported results. In general, the company's financial results are
affected positively by a weaker U.S. Dollar and are affected
negatively by a stronger U.S. Dollar as compared to the foreign
currencies in which it conducts its business. References to
operating results on a constant-currency basis mean operating
results without the impact of foreign currency exchange rate
fluctuations.
The company believes disclosure of constant-currency results is
helpful to investors because it facilitates period-to-period
comparisons of its results by increasing the transparency of the
underlying performance by excluding the impact of fluctuating
foreign currency exchange rates. However, constant-currency results
are non-GAAP financial measures and are not meant to be considered
as an alternative or substitute for comparable measures prepared in
accordance with GAAP. Constant-currency results have no
standardized meaning prescribed by GAAP, are not prepared under any
comprehensive set of accounting rules or principles and should be
read in conjunction with the company's consolidated financial
statements prepared in accordance with GAAP. Constant-currency
results have limitations in their usefulness to investors and may
be calculated differently from, and therefore may not be directly
comparable to, similarly titled measures used by other
companies.
The company calculates constant-currency amounts by translating
local currency amounts in the prior-year period at actual foreign
exchange rates for the current period. Constant-currency results do
not eliminate the transaction currency impact, which primarily
include the realized and unrealized gains and losses recognized
from the measurement and remeasurement of purchases and sales of
products in a currency other than the functional currency.
Additionally, gross margin is impacted by gains and losses related
to the procurement of inventory, primarily products sourced in EUR
and USD, by the company's global sourcing organization on behalf of
its foreign subsidiaries.
Source: Levi Strauss & Co. Investor Relations
LEVI STRAUSS & CO. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
August 27, 2023
November 27,
2022
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents
$
294.5
$
429.6
Short-term investments in marketable
securities
—
70.6
Trade receivables, net
690.2
697.0
Inventories
1,373.8
1,416.8
Other current assets
207.2
213.9
Total current assets
2,565.7
2,827.9
Property, plant and equipment, net
677.3
622.8
Goodwill
300.7
365.7
Other intangible assets, net
268.8
286.7
Deferred tax assets, net
723.5
625.0
Operating lease right-of-use assets,
net
948.7
970.0
Other non-current assets
389.5
339.7
Total assets
$
5,874.2
$
6,037.8
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Short-term debt
39.5
11.7
Accounts payable
573.5
657.2
Accrued salaries, wages and employee
benefits
194.9
246.7
Accrued sales returns and allowances
182.9
180.0
Short-term operating lease liabilities
239.9
235.7
Other accrued liabilities
577.4
650.3
Total current liabilities
1,808.1
1,981.6
Long-term debt
1,004.6
984.5
Long-term operating lease liabilities
823.1
859.1
Long-term employee related benefits and
other liabilities
297.0
308.9
Total liabilities
3,932.8
4,134.1
Commitments and contingencies
Stockholders’ Equity:
Common stock — $0.001 par value;
1,200,000,000 Class A shares authorized, 100,025,877 shares and
96,028,351 shares issued and outstanding as of August 27, 2023 and
November 27, 2022, respectively; and 422,000,000 Class B shares
authorized, 297,070,877 shares and 297,703,442 shares issued and
outstanding, as of August 27, 2023 and November 27, 2022,
respectively
0.4
0.4
Additional paid-in capital
668.1
625.6
Accumulated other comprehensive loss
(398.1
)
(421.7
)
Retained earnings
1,671.0
1,699.4
Total stockholders’ equity
1,941.4
1,903.7
Total liabilities and stockholders’
equity
$
5,874.2
$
6,037.8
The notes accompanying the consolidated
financial statements in the company's Form 10-Q for the third
quarter of fiscal 2023 are an integral part of these consolidated
financial statements.
LEVI STRAUSS & CO. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended
Nine Months Ended
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
(Dollars in millions, except
per share amounts)
(Unaudited)
Net revenues
$
1,511.0
$
1,517.2
$
4,536.7
$
4,579.9
Cost of goods sold
671.5
654.3
1,970.7
1,918.4
Gross profit
839.5
862.9
2,566.0
2,661.5
Selling, general and administrative
expenses
714.5
663.8
2,273.7
2,140.4
Goodwill and other intangible asset
impairment charges
90.2
—
90.2
11.6
Operating income
34.8
199.1
202.1
509.5
Interest expense
(11.5
)
(7.7
)
(35.4
)
(16.3
)
Other (expense) income, net
(26.7
)
(5.2
)
(38.1
)
16.7
(Loss) income before income taxes
(3.4
)
186.2
128.6
509.9
Income tax (benefit) expense
(13.0
)
13.3
5.9
91.4
Net income
$
9.6
$
172.9
$
122.7
$
418.5
Earnings per common share attributable to
common stockholders:
Basic
$
0.02
$
0.44
$
0.31
$
1.05
Diluted
$
0.02
$
0.43
$
0.31
$
1.03
Weighted-average common shares
outstanding:
Basic
397,767,394
397,114,612
396,969,596
398,098,161
Diluted
400,992,735
402,917,852
401,454,820
405,072,746
The notes accompanying the consolidated
financial statements in the company's Form 10-Q for the third
quarter of fiscal 2023 are an integral part of these consolidated
financial statements.
LEVI STRAUSS & CO. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
Nine Months Ended
August 27, 2023
August 28, 2022
(Dollars in millions)
(Unaudited)
Cash Flows from Operating
Activities:
Net income
$
122.7
$
418.5
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
122.2
117.9
Goodwill and other intangible asset
impairment
90.2
11.6
Property, plant, equipment, right-of-use
asset impairment, and early lease terminations, net
25.0
36.1
Stock-based compensation
56.4
45.9
Benefit from deferred income taxes
(77.0
)
(1.7
)
Other, net
4.5
31.4
Net change in operating assets and
liabilities
(167.4
)
(449.4
)
Net cash provided by operating
activities
176.6
210.3
Cash Flows from Investing
Activities:
Purchases of property, plant and
equipment
(259.0
)
(196.8
)
Proceeds (payments) on settlement of
forward foreign exchange contracts not designated for hedge
accounting, net
27.3
(20.6
)
Payments to acquire short-term
investments
—
(70.4
)
Proceeds from sale, maturity and
collection of short-term investments
70.8
60.7
Net cash used for investing activities
(160.9
)
(227.1
)
Cash Flows from Financing
Activities:
Proceeds from senior revolving credit
facility
200.0
—
Repayments of senior revolving credit
facility
(175.0
)
—
Repurchase of common stock
(8.1
)
(140.7
)
Dividends to stockholders
(142.9
)
(127.0
)
Other financing activities, net
(13.1
)
(20.0
)
Net cash used for financing activities
(139.1
)
(287.7
)
Effect of exchange rate changes on cash
and cash equivalents and restricted cash
(11.8
)
(6.9
)
Net decrease in cash and cash equivalents
and restricted cash
(135.2
)
(311.4
)
Beginning cash and cash equivalents, and
restricted cash
430.0
810.6
Ending cash and cash equivalents, and
restricted cash
294.8
499.2
Less: Ending restricted cash
(0.3
)
(0.3
)
Ending cash and cash
equivalents
$
294.5
$
498.9
Noncash Investing Activity:
Property, plant and equipment acquired and
not yet paid at end of period
$
38.4
$
50.4
Supplemental disclosure of cash flow
information:
Cash paid for income taxes during the
period, net of refunds
66.8
83.9
The notes accompanying the consolidated
financial statements in the company's Form 10-Q for the third
quarter of fiscal 2023 are an integral part of these consolidated
financial statements.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES FOR THE THIRD QUARTER OF 2023
The following information relates to
non-GAAP financial measures, and should be read in conjunction with
the investor call held on October 5, 2023, discussing the company’s
financial condition and results of operations as of and for the
quarter and year ended August 27, 2023.
We define the following non-GAAP measures
as follows:
Most comparable GAAP measure
Non-GAAP measure
Non-GAAP measure definition
Gross profit
Adjusted gross profit
Gross profit excluding COVID-19 and
acquisition related inventory costs
Gross margin
Adjusted gross margin
Adjusted gross profit as a percentage of
net revenues
Selling, general and administration
(“SG&A”) expenses
Adjusted SG&A
SG&A expenses excluding changes in
fair value on cash-settled stock-based compensation, COVID-19
related charges, acquisition and integration related charges,
impairment charges and early lease termination gains, net and
restructuring and restructuring related charges, severance and
other, net.
SG&A margin
Adjusted SG&A margin
Adjusted SG&A as a percentage of net
revenues
Net income
Adjusted EBIT
Net income excluding income tax (benefit)
expense, interest expense, other expense (income), net, loss on
early extinguishment of debt, impact of changes in fair value on
cash-settled stock-based compensation, COVID-19 related inventory
costs and other charges, acquisition and integration related
charges, impairment charges and early lease termination gains, net,
goodwill and other intangible asset impairment charges, and
restructuring and restructuring related charges, severance and
other, net.
Net income margin
Adjusted EBIT margin
Adjusted EBIT as a percentage of net
revenues
Net income
Adjusted EBITDA
Adjusted EBIT excluding depreciation and
amortization expense
Net income
Adjusted net income
Net income excluding charges related to
the impact of changes in fair value on cash-settled stock-based
compensation, COVID-19 related inventory costs and other charges,
net, acquisition and integration related charges, impairment
charges and early lease termination gains, net, goodwill and other
intangible asset impairment charges, restructuring and
restructuring related charges, severance and other, net, pension
settlement loss, and re-measurement of our deferred tax assets and
liabilities based on the lower rates as a result of the Tax Cuts
and Jobs Act ("Tax Act"), adjusted to give effect to the income tax
impact of such adjustments.
Net income margin
Adjusted net income margin
Adjusted net income as a percentage of net
revenues
Diluted earnings per share
Adjusted diluted earnings per share
Adjusted net income per weighted-average
number of diluted common shares outstanding
Adjusted Gross Profit:
Three Months Ended
Nine Months Ended
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Gross profit
$
839.5
$
862.9
$
2,566.0
$
2,661.5
Non-GAAP measure:
Gross profit
$
839.5
$
862.9
$
2,566.0
$
2,661.5
COVID-19 related inventory costs
—
—
—
1.4
Acquisition related charges(1)
—
—
—
2.0
Adjusted gross profit
$
839.5
$
862.9
$
2,566.0
$
2,664.9
Gross margin
55.6
%
56.9
%
56.6
%
58.1
%
Adjusted gross margin
55.6
%
56.9
%
56.6
%
58.2
%
_____________
(1)
Acquisition related charges include the
inventory markup above historical carrying value associated with
the Beyond Yoga® acquisition.
Adjusted SG&A:
Three Months Ended
Nine Months Ended
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Selling, general and administrative
expenses
$
714.5
$
663.8
$
2,273.7
$
2,140.4
Non-GAAP measure:
Selling, general and administrative
expenses
$
714.5
$
663.8
$
2,273.7
$
2,140.4
Impact of changes in fair value on
cash-settled stock-based compensation
—
—
—
(0.6
)
COVID-19 related charges
—
—
—
(3.9
)
Acquisition and integration related
charges
(1.3
)
(1.5
)
(3.8
)
(4.6
)
Property, plant, equipment, right-of-use
asset impairment, and early lease terminations, net(1)
(9.8
)
7.6
(24.7
)
(31.9
)
Restructuring and restructuring related
charges, severance and other, net(2)
(1.7
)
5.5
(33.8
)
(5.2
)
Adjusted SG&A
$
701.7
$
675.4
$
2,211.4
$
2,094.2
SG&A margin
47.3
%
43.8
%
50.1
%
46.7
%
Adjusted SG&A margin
46.4
%
44.5
%
48.7
%
45.7
%
_____________
(1)
For the three-month period ended August
27, 2023, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net primarily includes
$6.1 million of capitalized internal-use software as a result of
the decision to discontinue certain technology projects, as well as
$3.7 million of impairment related to other discontinued projects.
For the nine-month period ended August 27, 2023, property, plant,
equipment, right-of-use asset impairment, and early lease
terminations, net primarily includes $24.9 million of capitalized
internal-use software as a result of the decision to discontinue
certain technology projects, a $3.9 million gain on the early
termination of store leases related to the Russia-Ukraine crisis,
and $3.7 million of impairment related to other discontinued
projects.
For the three-month period ended August
28, 2022, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net includes a $7.6
million gain on the early termination of store leases related to
the Russia-Ukraine crisis. For the nine-month period ended August
28, 2022, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net primarily includes
$4.1 million of property, plant and equipment and $35.4 million of
certain store right-of-use assets, net of a $7.6 million gain on
the early termination of store leases related to the Russia-Ukraine
crisis.
(2)
For the three-month and nine-month periods
ended August 27, 2023, restructuring and restructuring related
charges, severance, and other, net primarily relates to
restructuring charges and other executive severance and separation
charges. Costs associated with the wind-down of the Russia business
and other transaction and deal related costs are also included.
For the three-month and nine-month periods
ended August 28, 2022, restructuring and restructuring related
charges, severance and other, net includes $5.6 million of charges
related to the Russia-Ukraine crisis. Other, net includes
transaction and deal related costs.
Adjusted EBIT and Adjusted
EBITDA:
The following table presents a
reconciliation of net income, the most directly comparable
financial measure calculated in accordance with GAAP, to Adjusted
EBIT and Adjusted EBITDA for each of the periods presented.
Three Months Ended
Nine Months Ended
Twelve Months Ended
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Net income
$
9.6
$
172.9
$
122.7
$
418.5
$
273.3
$
571.4
Non-GAAP measure:
Net income
$
9.6
$
172.9
$
122.7
$
418.5
$
273.3
$
571.4
Income tax (benefit) expense
(13.0
)
13.3
5.9
91.4
(5.0
)
105.3
Interest expense
11.5
7.7
35.4
16.3
44.8
27.8
Other expense (income), net
26.7
5.2
38.1
(16.7
)
26.0
(14.9
)
Loss on early extinguishment of debt
—
—
—
—
—
6.2
Impact of changes in fair value on
cash-settled stock-based compensation
—
—
—
0.6
—
1.4
COVID-19 related inventory costs and other
charges
—
—
—
5.3
—
11.9
Acquisition and integration related
charges(1)
1.3
1.5
3.8
6.6
5.2
14.3
Property, plant, equipment, right-of-use
asset impairment and early lease terminations, net(2)
9.8
(7.6
)
24.7
31.9
14.4
31.9
Goodwill and other intangible asset
impairment charges(3)
90.2
—
90.2
11.6
90.2
11.6
Restructuring and restructuring related
charges, severance and other, net(4)
1.7
(5.5
)
33.8
5.2
48.0
6.3
Adjusted EBIT
$
137.8
$
187.5
$
354.6
$
570.7
$
496.9
$
773.2
Depreciation and amortization(5)
41.6
39.2
118.8
114.7
158.6
151.5
Adjusted EBITDA
$
179.4
$
226.7
$
473.4
$
685.4
$
655.5
$
924.7
Net income margin
0.6
%
11.4
%
2.7
%
9.1
%
Adjusted EBIT margin
9.1
%
12.4
%
7.8
%
12.5
%
_____________
(1)
Acquisition and integration related
charges includes the inventory markup above historical carrying
value, as well as SG&A expenses associated with the Beyond
Yoga® acquisition, including acquisition-related compensation
subject to the continued employment of certain Beyond Yoga®
employees.
(2)
For the three-month period ended August
27, 2023, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net primarily includes
$6.1 million of capitalized internal-use software as a result of
the decision to discontinue certain technology projects, as well as
$3.7 million of impairment related to other discontinued projects.
For the nine-month period ended August 27, 2023, property, plant,
equipment, right-of-use asset impairment, and early lease
terminations, net primarily includes $24.9 million of capitalized
internal-use software as a result of the decision to discontinue
certain technology projects, a $3.9 million gain on the early
termination of store leases related to the Russia-Ukraine crisis,
and $3.7 million of impairment related to other discontinued
projects.
For the three-month period ended August
28, 2022, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net includes a $7.6
million gain on the early termination of store leases related to
the Russia-Ukraine crisis. For the nine-month period ended August
28, 2022, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net primarily includes
$4.1 million of property, plant and equipment and $35.4 million of
certain store right-of-use assets, net of a $7.6 million gain on
the early termination of store leases related to the Russia-Ukraine
crisis.
(3)
For the three-month and nine-month periods
ended August 27, 2023, goodwill and other intangible asset
impairment charges includes impairment charges of $75.4 million
related to Beyond Yoga® reporting unit goodwill and $14.8 million
related to the Beyond Yoga® trademark.
(4)
For the three-month and nine-month periods
ended August 27, 2023, restructuring and restructuring related
charges, severance, and other, net primarily relates to
restructuring charges and other executive severance and separation
charges. Costs associated with the wind-down of the Russia business
and other transaction and deal related costs are also included.
For the three-month and nine-month periods
ended August 28, 2022, restructuring and restructuring related
charges, severance and other, net includes $5.6 million of charges
related to the Russia-Ukraine crisis. Other, net includes
transaction and deal related costs.
(5)
Depreciation and amortization amount net
of amortization included in Restructuring and restructuring related
charges, severance and other, net.
Adjusted Net Income:
Three Months Ended
Nine Months Ended
Twelve Months Ended
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
(Dollars in millions, except
per share amounts)
(Unaudited)
Most comparable GAAP measure:
Net income
$
9.6
$
172.9
$
122.7
$
418.5
$
273.3
$
571.4
Non-GAAP measure:
Net income
$
9.6
$
172.9
$
122.7
$
418.5
$
273.3
$
571.4
Impact of changes in fair value on
cash-settled stock-based compensation
—
—
—
0.6
—
1.4
Loss on early extinguishment of debt
—
—
—
—
—
6.2
COVID-19 related inventory costs and other
charges, net(1)
—
—
—
(7.2
)
—
(0.6
)
Acquisition and integration related
costs(2)
1.3
1.5
3.8
6.6
5.2
14.3
Property, plant, equipment, right-of-use
asset impairment and early lease terminations, net(3)
9.8
(7.6
)
24.7
31.9
14.4
31.9
Goodwill and other intangible asset
impairment charges(4)
90.2
—
90.2
11.6
90.2
11.6
Unrealized gains on marketable
securities
—
—
—
—
(19.9
)
—
Restructuring and restructuring related
charges, severance and other, net(5)
1.7
(5.5
)
33.8
5.2
48.0
6.3
Pension settlement loss(6)
19.0
—
19.0
—
19.0
—
Tax impact of adjustments(7)
(19.6
)
0.1
(32.2
)
0.1
(31.6
)
(5.5
)
Adjusted net income
$
112.0
$
161.4
$
262.0
$
467.3
$
398.6
$
637.0
Net income margin
0.6
%
11.4
%
2.7
%
9.1
%
Adjusted net income margin
7.4
%
10.6
%
5.8
%
10.2
%
_____________
(1)
Represents costs incurred in connection
with COVID-19. For the nine-month period ended August 28, 2022, the
net reduction primarily reflects a payment received from the German
government as reimbursement for COVID-19 losses incurred in prior
years.
(2)
Acquisition and integration related
charges includes the inventory markup above historical carrying
value, as well as SG&A expenses associated with the Beyond
Yoga® acquisition.
(3)
For the three-month period ended August
27, 2023, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net primarily includes
$6.1 million of capitalized internal-use software as a result of
the decision to discontinue certain technology projects, as well as
$3.7 million of impairment related to other discontinued projects.
For the nine-month period ended August 27, 2023, property, plant,
equipment, right-of-use asset impairment, and early lease
terminations, net primarily includes $24.9 million of capitalized
internal-use software as a result of the decision to discontinue
certain technology projects, a $3.9 million gain on the early
termination of store leases related to the Russia-Ukraine crisis,
and $3.7 million of impairment related to other discontinued
projects.
For the three-month period ended August
28, 2022, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net includes a $7.6
million gain on the early termination of store leases related to
the Russia-Ukraine crisis. For the nine-month period ended August
28, 2022, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net primarily includes
$4.1 million of property, plant and equipment and $35.4 million of
certain store right-of-use assets, net of a $7.6 million gain on
the early termination of store leases related to the Russia-Ukraine
crisis.
(4)
For the three-month and nine-month periods
ended August 27, 2023, goodwill and other intangible asset
impairment charges includes impairment charges of $75.4 million
related to Beyond Yoga® reporting unit goodwill and $14.8 million
related to the Beyond Yoga® trademark.
(5)
For the three-month and nine-month periods
ended August 27, 2023, restructuring and restructuring related
charges, severance, and other, net primarily relates to
restructuring charges and other executive severance and separation
charges. Costs associated with the wind-down of the Russia business
and other transaction and deal related costs are also included.
For the three-month and nine-month periods
ended August 28, 2022, restructuring and restructuring related
charges, severance and other, net includes $5.6 million of charges
related to the Russia-Ukraine crisis. Other, net includes
transaction and deal related costs.
(6)
For the three-month and nine-month periods
ended August 27, 2023, the pension settlement relates to the
Company purchasing nonparticipating annuity contracts in order to
transfer certain retiree liabilities to an insurer, resulting in a
one-time settlement charge of $19.0 million.
(7)
Tax impact calculated using the annual
effective tax rate, excluding discrete costs and benefits. Charges
associated with the Russia-Ukraine crisis are non-deductible and
therefore have not been tax effected. The tax impact of the Beyond
Yoga® impairment charges were calculated using the U.S. specific
tax rate of 24%. Excluding the impact of the Beyond Yoga®
impairment charges, the annual effective tax rate is approximately
13%.
Adjusted Diluted Earnings per
Share:
Three Months Ended
Nine Months Ended
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
(Unaudited)
Most comparable GAAP measure:
Diluted earnings per share
$
0.02
$
0.43
$
0.31
$
1.03
Non-GAAP measure:
Diluted earnings per share
$
0.02
$
0.43
$
0.31
$
1.03
COVID-19 related inventory costs and other
charges, net(1)
—
—
—
(0.02
)
Acquisition and integration related
costs(2)
—
—
0.01
0.02
Property, plant, equipment, right-of-use
asset impairment and early lease terminations, net(3)
0.03
(0.02
)
0.06
0.08
Goodwill and other intangible asset
impairment charges(4)
0.22
—
0.22
0.03
Restructuring and restructuring related
charges, severance and other, net(5)
—
(0.01
)
0.08
0.01
Pension settlement loss(6)
0.05
—
0.05
—
Tax impact of adjustments(7)
(0.04
)
—
(0.08
)
—
Adjusted diluted earnings per
share
$
0.28
$
0.40
$
0.65
$
1.15
_____________
(1)
Represents costs incurred in connection
with COVID-19. For the nine-month period ended August 28, 2022, the
net reduction primarily reflects a payment received from the German
government as reimbursement for COVID-19 losses incurred in prior
years.
(2)
Acquisition and integration related
charges includes the inventory markup above historical carrying
value, as well as SG&A expenses associated with the Beyond
Yoga® acquisition.
(3)
For the three-month period ended August
27, 2023, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net primarily includes
$6.1 million of capitalized internal-use software as a result of
the decision to discontinue certain technology projects, as well as
$3.7 million of impairment related to other discontinued projects.
For the nine-month period ended August 27, 2023, property, plant,
equipment, right-of-use asset impairment, and early lease
terminations, net primarily includes $24.9 million of capitalized
internal-use software as a result of the decision to discontinue
certain technology projects, a $3.9 million gain on the early
termination of store leases related to the Russia-Ukraine crisis,
and $3.7 million of impairment related to other discontinued
projects.
For the three-month period ended August
28, 2022, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net includes a $7.6
million gain on the early termination of store leases related to
the Russia-Ukraine crisis. For the nine-month period ended August
28, 2022, property, plant, equipment, right-of-use asset
impairment, and early lease terminations, net primarily includes
$4.1 million of property, plant and equipment and $35.4 million of
certain store right-of-use assets, net of a $7.6 million gain on
the early termination of store leases related to the Russia-Ukraine
crisis.
(4)
For the three-month and nine-month periods
ended August 27, 2023, goodwill and other intangible asset
impairment charges includes impairment charges of $75.4 million
related to Beyond Yoga® reporting unit goodwill and $14.8 million
related to the Beyond Yoga® trademark.
(5)
For the three-month and nine-month periods
ended August 27, 2023, restructuring and restructuring related
charges, severance, and other, net primarily relates to
restructuring charges and other executive severance and separation
charges. Costs associated with the wind-down of the Russia business
and other transaction and deal related costs are also included.
For the three-month and nine-month periods
ended August 28, 2022, restructuring and restructuring related
charges, severance and other, net includes $5.6 million of charges
related to the Russia-Ukraine crisis. Other, net includes
transaction and deal related costs.
(6)
For the three-month and nine-month periods
ended August 27, 2023, the pension settlement relates to the
Company purchasing nonparticipating annuity contracts in order to
transfer certain retiree liabilities to an insurer, resulting in a
one-time settlement charge of $19.0 million.
(7)
Tax impact calculated using the annual
effective tax rate, excluding discrete costs and benefits. Charges
associated with the Russia-Ukraine crisis are non-deductible and
therefore have not been tax effected. The tax impact of the Beyond
Yoga® impairment charges were calculated using the U.S. specific
tax rate of 24%. Excluding the impact of the Beyond Yoga®
impairment charges, the annual effective tax rate is approximately
13%.
Net Debt and Leverage Ratio:
We define net debt, a non-GAAP financial
measure, as total debt, excluding finance leases, less cash and
cash equivalents and short-term investments in marketable
securities. We define leverage ratio, a non-GAAP financial measure,
as the ratio of total debt, excluding finance leases, to the last
12 months Adjusted EBITDA. Our management believes net debt and
leverage ratio are important measures to monitor our financial
flexibility and evaluate the strength of our balance sheet. Net
debt and leverage ratio have limitations as analytical tools and
may vary from similarly titled measures used by other companies.
Net debt and leverage ratio should not be considered in isolation
or as a substitute for an analysis of our results prepared and
presented in accordance with GAAP.
The following table presents a reconciliation of total debt,
excluding finance leases, the most directly comparable financial
measure calculated in accordance with GAAP, to net debt for each of
the periods presented.
August 27, 2023
November 27,
2022
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Total debt, excluding finance leases
$
1,044.1
$
996.2
Non-GAAP measure:
Total debt, excluding finance leases
$
1,044.1
$
996.2
Cash and cash equivalents
(294.5
)
(429.6
)
Short-term investments in marketable
securities
—
(70.6
)
Net debt
$
749.6
$
496.0
The following table presents a
reconciliation of total debt, excluding finance leases, the most
directly comparable financial measure calculated in accordance with
GAAP, to leverage ratio for each of the periods presented.
August 27, 2023
August 28, 2022
(Dollars in millions)
(Unaudited)
Total debt, excluding finance leases
$
1,044.1
$
971.8
Last Twelve Months Adjusted EBITDA(1)
$
655.5
$
924.7
Leverage ratio
1.6
1.1
_____________
(1)
Last Twelve Months Adjusted EBITDA is
reconciled from net income which is the most comparable GAAP
measure. Refer to Adjusted EBIT and Adjusted EBITDA table for more
information.
Adjusted Free Cash Flow:
We define Adjusted free cash flow, a
non-GAAP financial measure, as net cash flow from operating
activities less purchases of property, plant and equipment. We
believe Adjusted free cash flow is an important liquidity measure
of the cash that is available after capital expenditures for
operational expenses and investment in our business. We believe
Adjusted free cash flow is useful to investors because it measures
our ability to generate or use cash. Once our business needs and
obligations are met, cash can be used to maintain a strong balance
sheet, invest in future growth and return capital to
stockholders.
The following table presents a reconciliation of net cash
flow from operating activities, the most directly comparable
financial measure calculated in accordance with GAAP, to Adjusted
free cash flow for each of the periods presented.
Three Months Ended
Nine Months Ended
August 27, 2023
August 28, 2022
August 27, 2023
August 28, 2022
(Dollars in millions)
(Unaudited)
Most comparable GAAP measure:
Net cash provided by operating
activities
$
51.2
$
64.4
$
176.6
$
210.3
Net cash used for investing activities
(79.4
)
(91.9
)
(160.9
)
(227.1
)
Net cash used for financing activities
(145.0
)
(70.6
)
(139.1
)
(287.7
)
Non-GAAP measure:
Net cash provided by operating
activities
$
51.2
$
64.4
$
176.6
$
210.3
Purchases of property, plant and
equipment
(72.4
)
(76.3
)
(259.0
)
(196.8
)
Adjusted free cash flow
$
(21.2
)
$
(11.9
)
$
(82.4
)
$
13.5
Return on Invested Capital:
We define Return on invested capital
("ROIC") as the trailing four quarters of Adjusted net income
before interest and after taxes divided by the average trailing
five quarters of total invested capital. We define earnings before
interest and after taxes as Adjusted net income plus interest
expense and income tax expense less an income tax adjustment. We
define total invested capital as total debt plus shareholders'
equity less cash and short-term investments. We believe ROIC is
useful to investors as it quantifies how efficiently we generated
operating income relative to the capital we have invested in the
business.
Our calculation of ROIC is considered a
non-GAAP financial measure because we calculate ROIC using the
non-GAAP metric Adjusted net income. Although ROIC is a standard
financial metric, numerous methods exist for calculating a
company's ROIC. As a result, the method we use to calculate our
ROIC may differ from the methods used by other companies. This
metric is not defined by GAAP and should not be considered as an
alternative to earnings measures defined by GAAP.
The table below sets forth the calculation
of ROIC for each of the periods presented.
Trailing Four Quarters
August 27, 2023
August 28, 2022
(Dollars in millions)
(Unaudited)
Net income
$
273.3
$
571.4
Numerator
Adjusted net income(1)
$
398.6
$
637.0
Interest expense
44.8
27.8
Income tax expense
(5.0
)
105.3
Adjusted net income before interest and
taxes
438.4
770.1
Income tax adjustment(2)
8.3
(118.7
)
Adjusted net income before interest and
after taxes
$
446.7
$
651.4
_____________
(1)
Adjusted net income is reconciled from net
income which is the most comparable GAAP measure. Refer to Adjusted
Net Income table for more information.
(2)
Tax impact calculated using the trailing
four quarters effective tax rate, excluding discrete costs and
benefits.
Average Trailing Five
Quarters
August 27, 2023
August 28, 2022
(Dollars in millions)
(Unaudited)
Denominator
Total debt, including operating lease
liabilities
$
2,151.9
$
2,246.4
Shareholders' equity
1,915.9
1,711.3
Cash and Short-term investments
(437.5
)
(889.8
)
Total invested Capital
$
3,630.3
$
3,067.9
Net income to Total invested capital
7.5
%
18.6
%
Return on Invested Capital
12.3
%
21.2
%
Constant-Currency:
We calculate constant-currency amounts by translating local
currency amounts in the comparison period at actual foreign
exchange rates for the current period.
Constant-Currency Net Revenues:
The table below sets forth the calculation of net revenues on a
constant-currency basis for the comparison period applicable to the
three-month and nine-month periods ended August 27, 2023:
Three Months Ended
Nine Months Ended
August 27, 2023
August 28, 2022
%
Increase
(Decrease)
August 27, 2023
August 28, 2022
%
Increase
(Decrease)
(Dollars in millions)
(Unaudited)
Total net revenues
As reported
$
1,511.0
$
1,517.2
(0.4
)%
$
4,536.7
$
4,579.9
(0.9
)%
Impact of foreign currency exchange
rates
—
23.9
*
—
(24.7
)
*
Constant-currency net revenues
$
1,511.0
$
1,541.1
(2.0
)%
$
4,536.7
$
4,555.2
(0.4
)%
Americas
As reported
$
766.7
$
805.1
(4.8
)%
$
2,198.6
$
2,347.0
(6.4
)%
Impact of foreign currency exchange
rates
—
15.0
*
—
22.1
*
Constant-currency net revenues -
Americas
$
766.7
$
820.1
(6.5
)%
$
2,198.6
$
2,369.1
(7.2
)%
Europe
As reported
$
384.1
$
390.3
(1.6
)%
$
1,200.5
$
1,226.8
(2.1
)%
Impact of foreign currency exchange
rates
—
17.1
*
—
(0.8
)
*
Constant-currency net revenues -
Europe
$
384.1
$
407.4
(5.7
)%
$
1,200.5
$
1,226.0
(2.1
)%
Asia
As reported
$
246.5
$
220.6
11.7
%
$
797.7
$
700.9
13.8
%
Impact of foreign currency exchange
rates
—
(11.1
)
*
—
(49.2
)
*
Constant-currency net revenues - Asia
$
246.5
$
209.5
17.6
%
$
797.7
$
651.7
22.4
%
Other Brands
As reported
$
113.7
$
101.2
12.4
%
$
339.9
$
305.2
11.4
%
Impact of foreign currency exchange
rates
—
2.9
*
—
3.2
*
Constant-currency net revenues - Other
Brands
$
113.7
$
104.1
9.3
%
$
339.9
$
308.4
10.2
%
___________
* Not meaningful
Constant-Currency Adjusted EBIT and
Constant Currency Adjusted EBIT margin:
Three Months Ended
Nine Months Ended
August 27, 2023
August 28, 2022
%
(Decrease)
August 27, 2023
August 28, 2022
%
(Decrease)
(Dollars in millions)
(Unaudited)
Adjusted EBIT(1)
$
137.8
$
187.5
(26.5
)%
$
354.6
$
570.7
(37.9
)%
Impact of foreign currency exchange
rates
—
6.9
*
—
0.9
*
Constant-currency Adjusted EBIT
$
137.8
$
194.4
(29.1
)%
$
354.6
$
571.6
(38.0
)%
Adjusted EBIT margin
9.1
%
12.4
%
(26.6
)%
7.8
%
12.5
%
(37.6
)%
Impact of foreign currency exchange
rates
—
0.2
*
—
—
*
Constant-currency Adjusted EBIT
margin(2)
9.1
%
12.6
%
(27.8
)%
7.8
%
12.5
%
(37.6
)%
_____________
(1)
Adjusted EBIT is reconciled from net
income which is the most comparable GAAP measure. Refer to Adjusted
EBIT and Adjusted EBITDA table for more information.
(2)
We define constant-currency Adjusted EBIT
margin as constant-currency Adjusted EBIT as a percentage of
constant-currency net revenues.
* Not meaningful
Constant-Currency Adjusted Net Income and Adjusted Diluted
Earnings per Share:
Three Months Ended
Nine Months Ended
August 27, 2023
August 28, 2022
%
(Decrease)
August 27, 2023
August 28, 2022
%
(Decrease)
(Dollars in millions, except
per share amounts)
(Unaudited)
Adjusted net income (1)
$
112.0
$
161.4
(30.6
)%
$
262.0
$
467.3
(43.9
)%
Impact of foreign currency exchange
rates
—
6.1
*
—
3.2
*
Constant-currency Adjusted net income
$
112.0
$
167.5
(33.1
)%
$
262.0
$
470.5
(44.3
)%
Constant-currency Adjusted net income
margin(2)
7.4
%
10.9
%
5.8
%
10.3
%
Adjusted diluted earnings per share
$
0.28
$
0.40
(30.0
)%
$
0.65
$
1.15
(43.5
)%
Impact of foreign currency exchange
rates
—
0.02
*
—
0.01
*
Constant-currency Adjusted diluted
earnings per share
$
0.28
$
0.42
(33.3
)%
$
0.65
$
1.16
(44.0
)%
_____________
(1)
Adjusted net income is reconciled from net
income which is the most comparable GAAP measure. Refer to Adjusted
net income table for more information.
(2)
We define constant-currency Adjusted net
income margin as constant-currency Adjusted net income as a
percentage of constant-currency net revenues.
* Not meaningful
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231005581315/en/
Investor Contact: Aida Orphan Levi Strauss & Co. (415)
501-6194 Investor-Relations@levi.com
Media Contact: Elizabeth Owen Levi Strauss & Co. (415)
501-7777 NewsMediaRequests@levi.com
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