Dive Brief:
- Levi’s on Thursday cut its full-year financial outlook for the second consecutive quarter, citing continued softness in its wholesale business in the U.S., the company said in an earnings announcement. Wholesale revenues declined 8%.
- The company reported nearly flat net revenues of $1.5 billion in Q3, while net income fell 94% to $10 million, down from $173 million a year ago. Net revenues in the company’s Americas market were $767 million, down 5% from $805 million a year ago.
- Levi’s now forecasts its full-year revenue will range from flat to up 1% with a low single-digit decline in the Americas, CFO Harmit Singh said during the company’s earnings call.
Dive Insight:
Levi’s had cut its full-year guidance last quarter, citing declining sales in the U.S., which is the iconic apparel company’s largest market. Despite continued momentum in global DTC and improving wholesale trends last month, ongoing uncertainty in the macroeconomic environment is leading the company to take a cautious approach, Singh said.
CEO Chip Bergh said in a statement that Levi’s is “focused on the levers within our control and the actions we took in the third quarter are beginning to drive improvements in U.S. wholesale trends.” Those actions included cutting prices on price-sensitive items to kickstart sales.
“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,” Bergh said on a call with analysts.
Although the company is not immune to macroeconomic pressures, “the Levi’s brand continues to resonate with consumers,” Jessica Ramírez, a senior research analyst with Jane Hali & Associates, said in a September note on Levi’s. “We believe in the strength of the brand and its modern retail playbook.”
But Levi’s said in the Americas its company-operated mainline and outlet stores, along with e-commerce drove DTC net revenues up 12%; wholesale revenues also fell by 12%. Levi’s said growth in Latin America and Asia offset declines North America and Europe.
“While DTC is our channel priority and will continue to be a key growth driver for the company, our wholesale business remains important,” Bergh said on the call. “It amplifies our brands, creates access for consumers, and contributes to the bottom line. However, wholesale will continue to be a smaller part of our mix over time as we drive outsized growth in DTC.”
Levi Strauss & Co. acquired Beyond Yoga in 2021. Dockers, Signature and Denizen are also part of the corporate brand portfolio. Levi’s said net revenue for its other brands increased 12% Dockers increased 9% on a reported basis as strong growth internationally and in DTC was partially offset by U.S. wholesale, the company said, while Beyond Yoga rose 25% on reported and constant-currency bases. Beyond Yoga also had “a very strong quarter,” rising 25% year over year. And together, Dockers and Beyond Yoga are now generating about $500 million in annual revenue, Bergh said.
Ramírez said Levi’s is driving momentum across its non-denim categories like tops, dresses and soft bottoms and Beyond Yoga contributes to that momentum. “We believe there is strength in the Beyond Yoga brand and is a competitive player in the active/athleisure sector,” Ramírez said. “The brand is notably growing its awareness through partnerships, collaborations, store openings and digital updates.”
