What Happened:
Shares of denim clothing company Levi's (NYSE:LEVI) jumped 18.2% in the morning session after the company reported first-quarter results that blew past analysts' EPS expectations, driven by growth in its Direct-to-Consumer (DTC) sales in all business segments. As a reminder, DTC revenue has higher margins than wholesale revenue because the company can charge higher prices. In addition, management noted that nearly half of its revenue (48%) was generated from its DTC business (direct-to-consumer), which means less reliance on partners to drive the top line and potentially more flexibility, which could extend to how its products are priced. Furthermore, the company stated its revenue would have been flat year on year excluding its Russia business and divestiture of Denizen. Levi's also declared a dividend of $0.12 per share ($48 million total). The dividend is payable on May 23, 2024, to shareholders of record on May 9, 2024. Lastly, the company's full-year revenue and EPS guidance were in line with Wall Street's projections. Overall, this was a favorable quarter for Levi's.
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What is the market telling us:
Levi's's shares are somewhat volatile and over the last year have had 5 moves greater than 5%. But moves this big are very rare even for Levi's and that is indicating to us that this news had a significant impact on the market's perception of the business.
Levi's is up 33.3% since the beginning of the year. Investors who bought $1,000 worth of Levi's's shares 5 years ago would now be looking at an investment worth $999.45.
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