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Pay Attention to this Trade Activity: Levi Strauss & Co. (LEVI)

In the last quarter, the results that the famous clothing brand Levi Strauss & Co. (NYSE: LEVI) published in April showed that the company could increase its sales even compared to last year. So, remember, the retailer saw a surge in revenue after an enforced downtime due to a pandemic.

However, it remains unclear whether Levi Strauss will be able to sustain high growth rates in the face of high inflation, which is reaching double digits in some regions.

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The first quarter of fiscal 2022 provided Levi Strauss with a 22% year-over-year revenue growth to $1.59 billion. The strongest growth – around 25% – was seen in the Americas, while sales growth in Europe and Asia was 13% and 11%, respectively.

Additionally, the company credited direct sales for the overall revenue growth, with sales in this segment up 35% year-over-year as stores operated directly by Levi Strauss grew 48%. Wholesale sales showed more modest but still impressive growth of 15%.

Online sales of the company’s brands rose just 10%, marking a slowdown after a meteoric rise in pandemic quarters. Overall, global online revenue grew by 16% year-over-year and 25% year-over-year of total revenue.

Investors particularly liked the fact that adjusted earnings per share rose faster than revenue, indicating an increase in margins. In addition, cash generated from operations increased significantly compared to the same period of the previous year.

Thus, the first half was a success for Levi Strauss, but the acceleration of inflation could slow growth in the second half. Wall Street analysts fear consumers may be forced to forgo many discretionary items, including new clothes.

The company will likely be forced to increase the number of discounts to increase sales. But this will lead to a reduction in margins, even if it is possible to maintain income.

Management expects the fiscal year 2022 revenue growth of 11% to 13% to more than $6.4 billion. Adjusted earnings per share are expected to be between $1.5 and $1.56 per share.

Inflation is therefore a severe problem for Levi Strauss, so investing in his stocks remains risky for now.

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