Levi Strauss Issues Dismal Guidance, Shares Fall 6%
Levi Strauss issued disappointing guidance for its current fiscal year, citing unfavorable currency exchange rates, one fewer selling week, and a loss in revenue from its Denizen and footwear businesses. The company expects sales to decline by 1-2%, below estimates of 3.7% growth, and adjusted earnings per share to be between $1.20 and $1.25, below estimates of $1.37. Shares fell around 6% in extended trading.
CEO Michelle Gass attributed the expected drop in revenue to currency trends, fewer selling weeks, and the divested businesses, not slower demand. She noted that the company’s Reported earnings and sales for the fiscal fourth quarter topped expectations, with a 12% increase in sales to $1.84 billion, compared to $1.73 billion expected.
Gass has been working to bring more women to the brand, which has traditionally drawn more men, and has seen growth in sales from new products such as woven shirts and blouses. The company has also seen strong sales increases across all regions, including the Americas, Europe, and Asia.
Levi has also seen success with its marketing partnership with Beyoncé, which has driven demand across the business. Gass attributed a 19% increase in direct-to-consumer sales, which accounted for 45% of total organic net sales, to the campaign.
The company’s finance chief, Harmit Singh, said that while tariffs could have an impact on the business, the company’s exposure to China is minimal, and it plans to work with suppliers to minimize the impact on consumers. If tariffs are implemented, Levi may look at its cost base and pricing opportunities to spare consumers as much as possible.
The company reported a record gross margin of 61.3% for the quarter, driven by lower product costs, higher full-price sales, and a better mix between direct and wholesale revenue. Despite this, Levi reported $111.4 million in impairment charges related to its Beyond Yoga brand, driven by potentially aggressive expectations.
