Denim maker Levi Strauss has cut its annual sales forecast after missing analysts’ revenue expectations, resulting in a decline in the company’s share value in extended trading.
With weaker consumer demand at big box retail chains and department stores dragging its growth prospects, the company now expects revenue to either remain flat or see up to 1% year-over-year growth, down from its previous projection of 1.5% to 2.5% growth. Meanwhile, it expects its adjusted earnings per share to be lower than its previously projected range of $1.10 to $1.20.
Levi’s had previously also lowered its profit guidance.
For the quarter that ended August 27, the company’s net income came out to $10 million, or approximately 2 cents per share — a significant decline from the $173 million or 43 cents per share the company had reported for the same period last year. Overall, sales were nearly in line with the $1.52 billion revenue reported for the quarter last year.
The slowdown in Levi’s business underpins factors such as high mortgage rates, gas prices, and inflation, which has impacted consumers’ appetite to shop at stores that carry Levi’s products, according to CEO Chip Bergh.
“All the things that are impacting that middle-income consumer are impacting our wholesale business,” he said.
While the company saw a downturn in its wholesale business, direct-to-consumer sales rose by 14% during Q3 compared to the same period last year, while eCommerce sales saw a 19% increase.
Levi’s Chief Financial and Growth Officer Harmit Singh said that although the company saw double-digit growth in direct-to-consumer and eCommerce sales, it chose to take a conservative approach with its outlook, according to CNBC.