After missing third-quarter revenue on Thursday, Levi Strauss & Co. lowered its full-year profit forecast due to concerns about softening demand, a strengthening dollar, and higher costs. This caused shares to decline 6 per cent in extended trading.
Due to decades-high inflation, which has an impact on Levi’s and other apparel manufacturers, consumers are turning away from more expensive goods and clothing and toward necessities.
According to Chief Executive Officer Charles Bergh, the company is more cautious about doing business in Europe because the region’s consumers are suffering from much higher inflation and higher energy costs.
“The consumer in the U.S. is also having quite a difficulty with inflation and the thought of recession,” said Jessica Ramírez, analyst at Jane Hali and Associates, adding people are going to be more concerned about where their dollars are spent heading into the holiday season.
Levi’s reported an adjusted gross margin of 56.9 per cent, down 60 basis points from a year earlier, due to the rapidly strengthening dollar and higher product costs.
The jeans manufacturer has been raising the price of its denims to combat rising costs. Since the pandemic started, it has been dealing with supply chain disruptions, which are now made worse by the conflict between Russia and Ukraine.
Rather than expecting $1.50 to $1.56 per share for the entire year 2022, the company now projects an adjusted profit of $1.44 to $1.49 per share.
In terms of net revenue growth on a constant-currency basis, Levi’s anticipates full-year reported net revenue growth of 6.7 per cent to 7.0 per cent, or 11.5 per cent to 12 per cent. The business previously predicted a net revenue increase of 11 per cent to 13 per cent.
According to Refinitiv data, it earned 40 cents per share after items in the third quarter, exceeding estimates of 37 cents.
(Adapted from EconomicTimes.com)