Levi Strauss lowers year projections due to promotions and wholesale weakness

On Thursday, Levi Strauss & Co. reduced its year predictions for the second time after missing third-quarter sales projections as the denim manufacturer struggled with significant promotions and declining sales at its North American wholesale channels.

Retailers like Macy’s and Nordstrom have been impacted by gloomy consumer spending as high costs and borrowing rates constrain budgets and reduce demand for their denim bottoms, tops, and cargo trousers.

According to Chief Financial and Growth Officer Harmit Singh, the unseasonably warm weather in the late summer and fall also had a negative impact on sales, especially of men’s jeans in wholesale channels where Levi’s has less control over product displays.

“In our own stores, we have a lot more buy-now, wear-now product — think things like shorts, lighter denim, skirts, and dresses,”

Levi has had decreased wholesale sales throughout the board, especially in North America, where the middle-class consumer is more prevalent.

Customers who are “value-conscious” and make between $50,000 and $100,000 are particularly under pressure, according to Singh. Levi’s sales at retail partners like Walmart and Target, where the prices of its Signature and Denizen lines start slightly around $30, have been impacted by this.

Even while its direct-to-customer business, which caters to more affluent consumers, increased by 12 percent, net revenue for Levi’s Americas section fell by 5 percent.

Price reductions on certain denim bottoms sold to wholesale retailers like Macy’s and Nordstrom in an effort to appeal to more price-conscious customers also hurt its earnings.

Analysts have predicted that if wholesale channel sales continue to decline, Levi may need to expand promotions and lower pricing to maintain its profitability.

Levi predicted that sales would climb between zero and one percent in the fiscal year 2023, down from his previous projection of 1.5 to 2.5 percent growth.

According to the business, it anticipates an adjusted earnings per share at the low end of its previous expected range of $1.10 to $1.20. On average, analysts were anticipating $1.12.