Levi Strauss & Co. announced that it is adopting a more “cautious approach” to its outlook for the fourth quarter.
The denim brand’s more cautious outlook comes just three months after it already adjusted its full-year profit outlook.
In its second-quarter financial results released in July, GlobalData associate analyst, Alice Price labelled Europe and North America as a "thorn” in Levi’s side as both regions were underperforming in comparison to Asia.
This has continued in its third quarter (ending 27 August) with Levi reporting an 8% decline in net revenues for its overall wholesale business, with growth in Latin America and Asia offsetting its weakness in Europe and North America.
Global direct-to-consumer (DTC) revenue rose by 14% on a reported basis and 13% on a constant-currency basis.
Sales in the Americas declined by 5%, while those in Asia grew by 12%, driven by strong growth in China.
Levi’s adjusted gross margin was down 130 basis points to 55.6% during the third quarter due to lower full-price sales and higher product costs.
Key results from Levi Strauss Q3
- Net revenues of $1.5bn were consistent with the prior year on a reported basis and 2% lower on a constant-currency basis versus Q3 2022
- Operating income dropped to $34.8m from $199.1m in the same period the year before
- Net income was $9.6m compared to a net income of $172.9m in Q3 2022.
Levi revises fiscal 2023 guidance
Levi Strauss has revised its revenue expectations and now predicts that its reported net revenues will remain flat to up to 1% compared to the previous year. This is lower than the earlier prediction of growth between 1.5% to 2.5%.
The company also expects the adjusted earnings per share (EPS) to be at the lower end of the previously stated range of $1.10 to $1.20.
“We are focused on the levers within our control and the actions we took in the third quarter are beginning to drive improvements in US wholesale trends,” said president and CEO of Levi Strauss & Co, Chip Bergh.
“As we look longer term, we remain confident in our ability to achieve our goals given the global strength of the Levi’s brand, the momentum in our direct-to-consumer business globally, and the exceptional growth potential of our product portfolio and our international business.”
