(Reuters) – Levi Strauss & Co cut its annual profit forecast on Thursday, in a sign that higher costs were weighing on the denim maker’s margins at a time when its wholesale sales remained under pressure in North America.
Customers are turning more cautious on spending on pricier discretionary items such as apparel, home goods and electronics as fears of a recession mount in the United States.
The Dockers and Denizen brands’ owner said it now expects adjusted profit to be between $1.10 and $1.20 per share for the fiscal year 2023, compared with a range of $1.30 to $1.40 per share it previously expected.
Annual net revenue is expected to increase 1.5% to 2.5% from a year earlier, the apparel maker said, narrowing its previous forecast range of 1.5% to 3%.
San Francisco-based Levi’s has been grappling with higher costs, more promotions and supply chain snarls despite multiple price hikes on its products.
Revenue in its higher-margin direct-to-consumer channel increased 13% for the second quarter, while its wholesale channel, which includes sales to retailers like Target and Nordstrom, posted a 22% decline as retailers tightened their inventories in North America and Europe.
Sales in Americas declined 22%, while that in Europe fell 2%.
The company posted a net loss of $1.6 million for the quarter ended May 28, compared with a net income of $49.7 million a year earlier.
Its quarterly revenue fell 9.1% to $1.34 billion, roughly in-line with analysts’ expectations, according to Refinitiv data.
(Reporting by Granth Vanaik in Bengaluru; Editing by Shweta Agarwal)
