Levi Strauss & Co. recently reported quarterly revenue that fell below expectations, primarily due to lackluster performance in retail, including department stores. This has prompted the company to adjust its full-year sales outlook.
In a statement, Levi’s expressed a «cautious approach» to its current-quarter projections and revised its full-year earnings per share estimate to align with the lower end of the previously stated range, which is between $1.10 and $1.20. Additionally, Levi’s scaled back its revenue expectations.
While revenue for the quarter ending on August 27th missed estimates, strong growth in Latin America and Asia was offset by sluggish performance in Europe and North America.
This news triggered a 6.1% decline in Levi’s stock during late trading in New York, contributing to a year-to-date decline of 15%.
CEO Chip Bergh discussed the challenges, stating, «The middle-income consumer and those below are certainly feeling the impact, especially here in the US. This is also true in parts of Europe.» Bergh attributed this to elevated inflation rates and high interest rates, which have led to increased mortgage costs for consumers.
As the first major US apparel retailer to report during this earnings cycle, Levi’s results are closely watched and could set expectations for the industry. Typically, companies like Gap Inc. and retail giants such as Macy’s Inc. release their earnings in late November.
Levi’s cautious outlook, even after a prior guidance cut in July, suggests potential headwinds for the industry. The company cited a growing number of price-sensitive shoppers, especially those who frequent lower-priced wholesale partners like Walmart Inc., as a reason for caution.
Despite these challenges, the company reported a 14% increase in direct-to-consumer revenue during its fiscal third quarter, while wholesale revenue declined by 8%. Sales in the Americas decreased by 5%, but Asia showed robust growth of 12%, primarily driven by strong performance in China.
Levi Strauss & Co. also revealed plans to accelerate its transition toward a more direct-to-consumer model and initiate a cost-saving review aimed at enhancing operational agility, with anticipated benefits starting in 2024.
