Denim retailer Levi Strauss exceeds earnings expectations as customers pay more, maintains 2022 forecast.

• Levi Strauss exceeded analysts' expectations with its fiscal first-quarter earnings and revenue.
• Customers directly purchased jeans and T-shirts from the company at higher price points.
• Levi maintained its projection for fiscal 2022, provided there are no substantial intensification of inflationary pressures or shutdowns of international economies.
• Chip Bergh, CEO of Levi, stated on CNBC that consumers have not opted for cheaper clothing yet.

On Tuesday, the denim retailer reported higher-than-expected earnings and revenue for the fiscal first quarter, thanks to increased sales of jeans and T-shirts at higher price points, directly to customers.

Levi reaffirmed its forecast for fiscal 2022, considering no significant worsening of inflationary pressures or global economy closures. It factored in the impact of its recent decision to temporarily halt business in Russia, which accounts for approximately 2% of its total sales.

Despite rising prices for gasoline, groceries, and other goods, consumers have not yet started trading down for less expensive clothing, according to Levi CEO Chip Bergh, who spoke with CNBC in a phone interview. Despite raising prices on some items to cover other business expenses, consumer demand has remained strong, he added.

Bergh stated that Levi is closely monitoring consumer demand, as economists have been predicting a recession. "We are not blind to the situation," the CEO said. "If demand starts to waver, we will act accordingly."

After closing down 1.5% in regular trading, Levi's stock price rose around 1.5% in extended trading.

Based on a survey of analysts by Refinitiv, how did Levi's performance for the three-month period ended Feb. 27 compare with Wall Street's expectations for that period?

• Earnings per share: 46 cents adjusted vs. 42 cents expected
• Revenue: $1.59 billion vs. $1.55 billion expected

Levi's net income was $196 million, or 48 cents per share, compared to $143 million, or 35 cents a share, the previous year. Despite this, the company's earnings per share were 46 cents, surpassing the 42 cents that analysts had predicted.

To $1.59 billion from $1.31 billion a year earlier, revenue increased by 22%. This exceeded expectations of $1.55 billion.

During the latest period, Levi's global direct-to-consumer sales increased by 35% from the previous year, while wholesale revenue grew by 15%. However, the company suffered a roughly $60 million hit to sales due to supply chain constraints.

Levi has shifted its focus from partnering with big-box retailers and department stores to promoting its own brick-and-mortar stores and website. This strategy has proven to be more profitable and has allowed the company to establish stronger relationships with customers while collecting valuable insights on their browsing habits. In the latest quarter, direct-to-consumer sales accounted for 39% of total sales, up from 38% in the previous period and 36% a year ago, the company announced.

In the year-over-year basis, sales increased by 26% in the Americas, 13% in Europe, and 11% in Asia.

Levi has reaffirmed its revenue growth forecast for fiscal 2022, predicting an increase of between 11% and 13% year over year. Analysts have projected a slightly higher increase of 11.8%.

Despite analysts' predictions of $1.54, the retailer's annual per-share earnings are expected to fall between $1.50 and $1.56.

According to Chief Financial Officer Harmit Singh, the denim category is experiencing a low-double-digit growth rate compared to its pre-pandemic levels, as the world becomes increasingly casual.

Singh stated that the demand in March continued to grow, giving them confidence about the year's performance.

Find the full earnings press release from Levi here.