Levi Strauss (LEVI) -) shares slumped lower in early Friday trading after the iconic clothing maker slashed its full-year profit forecasts, citing a pullback in consumer spending, following weaker-than-expected third quarter sales.
Levi Strauss said sales for the three months ending in August, the group's fiscal third quarter, fell less than 1% from last year to $1.51 billion, missing Street forecasts, while adjusted earnings topped estimates by a penny at 28 cents per share.
Gross margins were also hit, falling 1.3% to 55.6%, thanks in part to deeper promotions needed to shift inventory that piled up as a result of a warmer-than-expected summer that slowed store traffic and higher product costs.
Looking into the final months of the year, Levi Strauss lowered its 2023 sales growth forecast to around 1%, compared to its earlier estimate of between 1.5% and 2.5%, with profits at the lower end of its $1.10 to $1.20 per share forecast.
“In the third quarter, we delivered double-digit growth in our direct-to-consumer business, driven by strong comp-store gains, which helped offset continued softness in the wholesale channel, primarily in the U.S.,” said CEO Chip Bergh.
“We are focused on the levers within our control and the actions we took in the third quarter are beginning to drive improvements in US wholesale trends," he added. "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."
Levi Strauss shares were marked 5.6% lower in pre-market trading to indicate an opening bell price of $12.47 each, a move that would extend the stock's six-month decline to around 10%.
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