Levi Strauss Lifts Profit Forecast on Cost Savings, Less Discounts

Levi Strauss raised its annual profit forecast on Wednesday, citing the apparel maker’s recent cost savings from job cuts and less aggressive discounts on its jeans and denim clothing, sending its shares up 7 percent in extended trading.

In a bid to cut costs, Levi’s has reduced its global corporate workforce, including trimming the number of senior leadership positions. It has also consolidated its operations in Europe and exited lower-margin businesses, such as its Denizen brand and European footwear enterprise.

The apparel retailer recorded a restructuring charge of $116 million in the first quarter.

Levi’s also reported a loss of $10.6 million, or 3 cents per share, in the first quarter, compared with a profit of $114.7 million, or 29 cents, a year earlier.

However, chief financial officer Harmit Singh said the jeans maker is “feeling good” about a more “stable” US consumer in a call with Reuters on Wednesday.

Sales of Levi’s clothing directly to consumers on its website and at the network of stores owned by the company rose 8 percent on a constant-currency basis, which follows a 10 percent increase in the prior quarter.

However, Levi’s sales through its still-important wholesale channels - which include department stores such as Macy’s and Kohl’s and other retailers such as Walmart - fell by 19 percent on a constant-currency basis, a steeper fall compared with a 3 percent drop in the fourth quarter.

With shoppers spending less on clothing amid sticky inflation, many chains that carry Levi’s jeans have pared back their orders in order to keep their inventories lean.

Levi’s intends to take similar measures and cut back on its stock keeping units, according to Singh.

“We’re going to be reducing about 15 percent of our SKUs and really think about expanding in goods that are actually resonating with the consumer,” Singh said. “What’s really resonating these days is the baggier fit, the low, loose assortment.”

Higher full-price sales and lower product costs also led Levi’s gross margins to rise by 240 basis points to 58.2 percent in the first quarter, from 55.8 percent a year earlier.

But the San Francisco-based firm said it continues to expect full-year revenue to grow in the range of 1 percent to 3 percent.

The denim maker said it expects an adjusted profit between $1.17 and $1.27 per share for 2024, up from its prior expectations of $1.15 to $1.25. Analysts’ expected a profit of $1.21 per share.

Its net revenue fell about 7.8 percent to $1.56 billion in the quarter ended Feb. 25, narrowly beating estimates of $1.55 billion, according to LSEG data.

By Granth Vanaik and Kate Masters; Editing by Krishna Chandra Eluri

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