Levi Strauss stock declines despite Q1 earnings beat

Yahoo Finance Live anchors Jared Blikre and Brad Smith discuss the decline in stock for Levi Strauss following first-quarter earnings.

Video Transcript

JARED BLIKRE: Got to talk jeans here. Levi Strauss beating estimates in its latest quarter. However, they're seeing a dip in operating income. And that's due to lower gross margins, higher expenses, and net income, as profits also takes a fall. It looks like shares trading down. I was looking. This is the worst day that the stock is having in six months, and there you can see some of the figures on your screen. I think this is just another execution story.

This is interesting because we're just starting the earnings season right now. And as it turns out, Levi, their earnings season ended on February 26, whereas most of their apparel, their peers are going to be reporting on results that ended March 31. So they get in the mix a little bit earlier. There's going to be some outsized attention on this. But I don't see anything that's moving the needle for me in terms of apparel that I didn't already see before.

BRAD SMITH: Yeah, in terms of the kind of international segments that you look at here, or at least kind of segments by globe, the Americas was down, Europe was down as well. Both of those missing estimates ultimately, and that's what I should say and frame it as, rather missing some of the estimates both in the Americas and Europe.

And then you think about how the company is positioning itself going forward right now and saying that, I think in some previous interviews, saying that skinny jeans are still going to hold on strong. If anybody has been tracking what the Gen Zers out there are doing, there's a lot of baggy jeans out there that are making a comeback. I'll have to probably dig mine back out of the closet from back in my kind of youth days.

But anyway, at the end of the day, if you have a major shift in fashion trends that continues to hold strong, then that could potentially be an inventory concern for a company like Levi's, who is already moving so much of kind of the trend where these skews into production or getting those into stores as well where they operate.

This is also a company that, of course, is going through executive change over there. Investors could be trying to price in what that turnaround will need to look like, given that they've got the new CEO who comes over from Kohl's. And we know how embattled that name had been as well in recent years.

JARED BLIKRE: Yep, inventory is up for most companies. And I guess they've been taking care of that. But in terms of Levi's, I believe those were up ending the quarter as well.