By Angela Christy M and Danielle Kaye
Oct 7 (Reuters) – Levi Strauss raised its annual profit forecast on Wednesday, after benefiting from tariff refunds, as it bets on strong holiday demand for its premium denim and sweaters.
Still, the company’s shares fell 2% in extended trading after it reported weaker-than-expected sales in the United States and Europe.
Here are more details:
• Levi’s received $79 million in refunds during the quarter ended August 30 for tariffs paid under the International Emergency Economic Powers Act and plans to redeploy about $60 million this year on promotions and marketing
• Comparable sales for its direct-to-consumer business were flat in the third quarter. CEO Michelle Gass said the business fell short of expectations as sales fell in the US, while “unseasonably” warm weather weighed on traffic in Europe
• The back-to-school US campaign focused too heavily on loose-fitting pants rather than popular low-rise styles, Gass said
• Nevertheless, the jeans maker’s women’s line emerged as a bright spot, driven in part by a push beyond denim into tops, skirts and dresses. Products apart from denim bottoms accounted for about half of the quarter’s top-line growth, Gass said
• Levi’s Blue Tab premium denim line grew double-digits, Gass added, as the jeans maker pushes to draw in higher-income shoppers
• Meanwhile, sales growth in Asia was fueled by a 13% uptick in China and new collaboration with singer Rosé
• The company raised its outlook for annual organic revenue growth to 6%, the upper end of its previous forecast of 5.5% to 6%
• It raised its forecast for full-year adjusted earnings to $1.54 to $1.56 per share, from $1.46 to $1.52 per share previously
• Net revenue for the quarter ended August 30 rose 4% to $1.61 billion, largely in line with estimates of $1.62 billion, according to data compiled by LSEG
• It earned 48 cents per share on an adjusted basis in the quarter, compared with analysts’ estimate of about 36 cents per share
• Direct-to-consumer performance in the third quarter was softer than expected, independent retail consultant Bruce Winder said, adding that the US market remains challenging due to elevated fuel prices
(Reporting by Angela Christy in Bengaluru and Danielle Kaye in New York; Editing by Diti Pujara)
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