The market has not performed according to the plans of Levi Strauss & Co which was forced to cut its annual forecasts for the second time this week after missing third-quarter sales estimates.
The denim maker has been reeling from hefty promotions and falling sales at its wholesale channels in North America. High prices and borrowing rates squeeze budgets, denting the demand for its denim bottoms, tops, and cargo pants.
Levi’s Growth Officer Harmit Singh lamented that unseasonably warm weather through the late summer and fall also hurt sales, particularly of men’s jeans in wholesale channels where Levi’s has less control over product displays. He told the media there was no dip in buying at Levi’sstore on items like shorts, lighter denim, skirts, and dresses.
North America has the highest exposure to middle-income consumers and this is the region where Levi struggles with declining sales. Shoppers earning between $50,000 and $100,000 are particularly under pressure, says Levi’s officer, adding it has impacted Levi’s sales at retail partners such as Walmart and Target, where prices of its Signature and Denizen lines start just below $30.
Net revenue in Levi’s Americas segment decreased 5 percent, even as its direct-to-customer business, which serves a more affluent consumer, rose 12 percent. Its margins were also hit by price cuts on certain denim bottoms sold to wholesale retailers like Macy’s and Nordstrom to boost sales among more price-sensitive shoppers.
Analysts have said Levi might have to increase promotions and cut prices if wholesale channel sales continue to worsen, which could pressure its margins further. Levi forecast revenue to be flat to 1 percent in fiscal 2023, compared with prior estimates of 1.5 percent to 2.5 percent growth.
Net revenue declined to $1.51 billion in the quarter ended Aug. 27 from $1.52 billion a year earlier, missing analysts’ estimate of $1.54 billion, according to LSEG data.
Levi Strauss sales dip in North America
