What to look for when Levi Strauss (LEVI) reports Q1 earnings on April 7

Levi Strauss & Co. (NYSE: LEVI) is slated to report its first-quarter 2020 earnings results on Tuesday, April 7, after the market closes. The bottom line will be impacted by costs and expenses as well as interest expenses despite remaining confident about the performance.

The top-line will be driven by its diversified business model that spans in three geographic regions. The company has a robust presence across both wholesale and direct-to-consumer channels and an established market share position in jeans, non-jeans bottoms, and tops for both men and women.

The growth will be fueled by continued diversification across channels, geographies and product categories while continuing to focus on productivity to drive leverage. The company has maintained a disciplined approach to investment after improving the overall profile and balance sheet in the past.

For the capital allocation strategy, the company will continue to invest in organic opportunities and initiatives, return capital to shareholders, and evaluate both organic and inorganic acquisitions that support its current strategies. However, the spread of the virus outbreak has enabled Levi to temporarily close its owned and operated retail locations in the US and Canada.

The company is likely to provide an update with regard to the store closures and lockdowns due to the rapid spread of coronavirus cases. The virus spread has lessened the traffic to the retail industry and this is likely to continue for the foreseeable future, which will bring down the top-line.

Analysts expect the company to report earnings of $0.35 per share on revenue of $1.48 billion for the first quarter. The company has surprised investors by beating analysts’ expectations in all of the past three quarters. Meanwhile, they remained cautious about the next quarter due to the impact of the COVID-19 spread on the company.

Till last month, the market analysts recommended a “strong-buy” or “buy” rating with an average price target of $20.75. However, the COVID-19 spread has turned the tables around as the analysts were not giving any recommendation.

For the fourth quarter, Levi Strauss reported a 2% decline in earnings due to higher interest expense. The top-line was hurt by the lack of Black Friday benefits and the impact of the acquisition of a South American distributor. Looking ahead into 2020 and beyond, the company continues to drive profitable growth over the long-term by executing its strategies.

The stock, which opened lower and is trading in the red on Friday, has fallen to a record low of $9.25 on April 3. The investors were concerned about the less consumer spending on non-essential items, which could hurt Levi’s growth in the near-term.