Justin Sullivan | Getty Images
Denim-crazed consumers are turning to Levi Strauss & Co for new jeans, but the company’s overall business is being dragged down by its Dockers brand, which the company is now considering selling off, it announced Wednesday.
Sales at Levi’s brand were up 5% during its fiscal third quarter — the biggest gain in two years — but overall revenue came in flat and lower than Wall Street had expected.
Shares of Levi’s fell more than 8% in extended trading Wednesday.
Here’s how the denim-maker performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
- Earnings per share: 33 cents adjusted vs. 31 cents expected
- Revenue: $1.52 billion vs. $1.55 billion expected
The company’s reported net income for the three-month period that ended Aug. 25 was $20.7 million, or 5 cents per share, compared with $9.6 million, or 2 cents per share, a year earlier. Excluding one-time items, Levi’s posted earnings of $132 million, or 33 cents per share.
Sales came in at $1.52 billion, up slightly from $1.51 billion a year earlier.
With one quarter left to go in the fiscal year, Levi reaffirmed its full-year adjusted earnings per share guidance of $1.17 to $1.27, in line with expectations of $1.25, according to LSEG. It expects earnings per share to come in at the midpoint of that range.
It trimmed its revenue guidance and is now expecting sales to grow 1%, compared to a previous range of between 1% and 3%. That’s below the 2.3% growth that analysts had expected, according to LSEG.
Bank of America to lead the sale process.
Macy’s. The strategy is a boon to profits because the margins are higher and it also allows brands to get closer to their customers through data collection.
During the quarter, Levi’s direct channel was up about 10%, driven by strength in the U.S. and 16% growth in e-commerce. Overall, direct sales comprised 44% of total revenue and Levi’s wants to get that number closer to 55%.
Behind those numbers are a slew of splashy marketing campaigns, which include a new partnership the jeans brand announced with Beyoncé on Monday after the pop star released a song titled “LEVII’S JEANS” earlier this year on her country album.
“Our strategic decision was to actually have Beyoncé represent some of our core product. So in the first ad, chapter one, she’s in … 501s and an essential white t-shirt and it doesn’t get more Levi’s than that,” CEO Michelle Gass told CNBC. “Part of the success recipe for Levi’s has been and will continue to be us living in the center of culture and bringing together the icon of Beyoncé with the icon of Levi’s, I don’t think there’s any better example of that.”
