Levi Strauss sinks after missing profit estimates, blames the cost of its recent IPO (LEVI)

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Levi Strauss & Co. reported second quarter earnings Tuesday that missed profit expectations but beat on revenue.
Shares of the retailer slid more than 6% in aftermarket trading on the news.
The company said the cost of its March IPO ate away at its bottom line.
Watch Levi’s trade live on Markets Insider.

Levi Strauss & Co.’s earnings have taken a hit from its costly public listing.

Shares of Levi Strauss & Co sank more than 6% after the close of trading Tuesday, when the company reported second quarter earnings. The results missed analyst expectations on earnings per share, but beat on revenue. The company attributed the lower income to the $29 million cost associated with its initial public offering in March, as well as higher advertising costs.

Here’s what the company reported versus what analysts surveyed by Bloomberg expected:

Adjusted earnings per share: $0.07 reported versus $0.12 (expected)

Revenue: $1.3 billion reported versus $1.29 billion (expected)

The company returned to the public market after a three-decade absence. In its filing to the SEC in February, it stated that it intends to increase its focus from jeans to other categories such as footwear and outerwear. It also said that it believed it had a "long runway for growth in both our tops and the women’s categories," according to the filing.

In the second quarter ant first half of the year, "the Levi’s brand grew in all three regions across men’s, women’s, tops and bottoms and maintained its position at the center of culture through iconic products and consumer experiences," said Chip Bergh, the CEO of Levi’s in a press release.

Net revenues increased across all regions— 3% in the Americas, 9% in Europe, and 6% in Asia. The company also grew it’s direct-to-consumer business revenues 9% by adding 78 stores and boosting its e-commerce.

The company did not adjust its annual guidance for fiscal 2019. The company expects net revenue growth in the mid-single digit range, and a slightly higher adjusted EBIT margin. Levi’s also noted that because the timing of its fiscal year ends on the last Sunday in November, 2019 will not have a Black Friday. This is an issue because the day usually boost net revenues by half a point.

Shares of Levi’s were up 3.5% through Tuesday’s close.

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