Levi Strauss & Co is experiencing mixed fortunes as rising demand for Levi’s jeans offsets challenges with its Dockers brand, which the company is considering selling. In its fiscal third quarter, Levi’s reported a 5% increase in sales for its namesake brand, marking its strongest growth in two years. However, overall revenue was flat and fell short of Wall Street expectations, causing the company’s shares to decline by over 8% in extended trading.
Levi’s earned 33 cents per share excluding one-time items, surpassing expectations of 31 cents, with revenues totaling $1.52 billion, slightly below the anticipated $1.55 billion. The company’s net income rose to $20.7 million compared to $9.6 million a year earlier. Despite the sluggish growth, Levi has maintained its full-year adjusted earnings guidance, though it lowered its revenue growth projection to 1%, down from the previously predicted range of 1% to 3%.
Dockers, traditionally a strong performer with its khakis line, has seen sales plummet by 15% as its popularity wanes. Levi’s is exploring selling the brand to enhance overall profit margins and reduce revenue volatility. Meanwhile, its athleisure brand Beyond Yoga saw sales grow by 19%.
Levi’s continues to strengthen its direct-to-consumer strategy, which has resulted in a gross margin increase of 4.4 percentage points. Direct sales, fueled by a 16% rise in e-commerce and strong performance in the U.S., now account for 44% of total revenue. The company aims to increase this to 55%, leveraging partnerships, such as with pop icon Beyoncé, to enhance brand appeal.
Internationally, Levi’s faced challenges, particularly in Asia, where sales fell short of expectations due to macroeconomic and execution issues in China. In the Americas, a cybersecurity breach with a significant wholesale partner in Mexico and issues with Dockers affected sales.
Levi’s is optimistic about resolving these challenges as it seeks to maximize growth and adapt to changing consumer preferences.
Original Story https://www.cnbc.com/2024/10/02/levi-levi-earnings-q3-2024.html
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