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Levi Strauss & Co. faced a significant setback as its shares slumped over 8% following lowered full-year guidance and declines across key areas, including its Dockers brand and domestic market. The company now expects sales growth for the current fiscal year to be around 1%, a downward revision from its earlier forecast of a 1% to 3% increase.
Shares of the iconic denim company fell 11% shortly after markets opened on Thursday in New York. This drop comes despite a relatively strong performance earlier in the year, where shares had climbed by 27%, outpacing the S&P Total Market Index over the same period.
Key Challenges and Brand Focus
The mixed performance of Levi Strauss reflects its shift toward relying more on its own retail stores and e-commerce. While these areas have shown some progress, other sectors are weighing down the company’s performance. A particular area of concern is the Dockers brand, which saw a sales decline of 15% to $73.7 million in the most recent quarter.
Levi Strauss has been exploring options for Dockers, including a possible sale, and has hired Bank of America to assist with the review process. CEO Michelle Gass noted that Dockers has “underperformed for some time” and emphasized a focus on the Levi’s and Beyond Yoga brands going forward.
Financial Impact and Market Performance
Lower-than-expected sales last quarter were influenced by several factors. The weakness of the Mexican peso against the US dollar, underperformance in the Chinese market, and a cybersecurity incident in June all played a role in the company’s financial results, according to CFO Harmit Singh.
While Levi’s has been making efforts to increase its direct-to-consumer sales, its wholesale segment saw a decline of 6% year-over-year in the latest quarter. On a more positive note, the company’s direct-to-consumer division grew by 10%, indicating some success in this strategic shift.
Partnerships and Future Expectations
Levi Strauss has also taken steps to boost its brand image by collaborating with major cultural influencers. Notably, the company partnered with pop icon Beyoncé, who generated buzz for Levi’s with her song “Levii’s Jeans” from her latest album. The recent advertising campaign featuring Beyoncé aimed to capitalize on the brand’s cultural resonance and drive consumer interest.
Despite the challenges, there is still optimism around Levi Strauss’s future. “With the recent intro of the Beyoncé ad campaign and continued fashion tailwinds, expectations were relatively high,” noted Paul Lejuez, an analyst at Citi, in a statement.
The company’s continued focus on bolstering its core brand and e-commerce growth, along with navigating market challenges, will be pivotal in shaping Levi Strauss’s financial trajectory in the coming quarters.