SAN FRANCISCO, California – Levi Strauss, the iconic American denim company, faced challenges in the second quarter of the year as its revenue fell short of market expectations due to uneven wholesale demand in the United States.
Despite a 12% drop in shares during extended trading, Levi Strauss expressed confidence in its annual profit and revenue forecast. The company attributed its setbacks to adverse foreign exchange effects and increased marketing expenses for the upcoming back-to-school and holiday seasons.
Amidst these challenges, Levi Strauss is shifting its focus towards a direct-to-consumer model and emphasizing higher-margin products. This strategic pivot comes after a period of inventory surplus in the previous year, leading to weaker wholesale demand for several quarters.
Although U.S. wholesale revenue declined by mid-single digits in the reported quarter, Levi Strauss noted that the channel was more profitable compared to the previous year, thanks to enhanced inventory management. The company’s Chief Financial Officer, Harmit Singh, highlighted the resilience of their consumer base, citing strong foot traffic in stores and increased online sales.
Despite promising signs from the denim market, Levi Strauss acknowledged underperformance in its Dockers brand, known for its chinos and khakis. The brand’s struggles had a negative impact on Levi’s overall revenue for the quarter, overshadowing solid demand for denim products, particularly in women’s clothing where full price sales were strong.
In a post-earnings call, Levi Strauss reported second-quarter adjusted profit per share of 16 cents, exceeding expectations. The company remains optimistic, forecasting net revenue growth in fiscal year 2024 to be at the higher end of its previous range and maintaining its annual adjusted profit forecast.
While Levi Strauss fell short of second-quarter revenue estimates, with net revenue reaching $1.44 billion instead of the expected $1.45 billion, the company is determined to navigate the challenges ahead and capitalize on emerging opportunities in the ever-evolving retail landscape.