Levi’s reported revenue of $1.51 billion.
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Levi Strauss’s third-quarter earnings narrowly exceeded what Wall Street expected, but the stock fell Thursday after the company lowered its financial forecasts.
Levi’s (ticker: LEVI) reported adjusted earnings per share of 28 cents, just above analyst projections for 27 cents a share. Sales of $1.51 billion, however, fell slightly short of the consensus call for $1.54 billion among analysts tracked by FactSet.
Adjusted gross margins fell 1.3 percentage points to 55.6% in the third quarter, driven by higher production costs and a continuing need to offer discounts.
“While we saw sequential improvement in the business across the company as we moved through Q3 with both July and August up versus prior year, given the ongoing uncertainty in the macro environment, we are taking a cautious approach to our outlook for the fourth quarter,” said Harmit Singh, chief financial officer, in a press release.
The company slightly lowered its revenue-growth projections for the full year. Levi’s is now expects revenue to either be flat or to grow by 1% compared with the previous year, below previous forecasts for growth of between 1.5% and 2.5% and under the Street’s expectations of 1.5% growth. Adjusted earnings per share will fall at the low end of its previously issued forecast range of $1.10 to $1.20, the company said.
This is the second consecutive quarter in which Levi’s lowered its projections for the fiscal year. In July, the company said it was expecting low- and middle-income consumers to be under financial pressure throughout the year.
Levi’s is in the midst of pivoting away from its traditional wholesale-focused sales strategy in favor of the direct-to-consumer model recently adopted by other wholesalers, such as
Nike
(NKE). This quarter, direct to consumer revenues increased 14% year over year and comprised 40% of total net revenues. Meanwhile, wholesale revenues fell 8%.
“As we accelerate our transition to a DTC-led company, we have commenced an initiative to review our operating model and cost structure that should drive agility and material cost savings beginning in 2024,” Singh said.
Shares of Levi’s fell 3% to $12.81 in after-hours trading. The stock is down 15% this year.
Write to Sabrina Escobar at [email protected]
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