Levi Strauss posts 4% fall in Q3 profit
NEW YORK: Levi Strauss & Co reported a 4% drop in third-quarter profit on Tuesday, as the denim apparel maker struggled to grow its wholesale business in its highest revenue-generating market, the Americas.
Reduced shipments to off price stores and the impact of a delayed acquisition of a South American distributor drove net revenue down about 3% in the region, the first fall since the 165-yearold company went public in March.
“US wholesale was challenged ... particularly the legacy department stores and chain stores, where (the) much publicised traffic declines have negatively impacted our business,” chief executive Chip Bergh said in an interview with Reuters.
The deteriorating retail landscape has forced longstanding brick-andmortar chains, including J.C. Penney Co Inc, to explore options, as they struggle to boost their e-commerce business to compete with the likes of Amazon. com Inc.
Bergh said Levi’s has been focusing on selling directly to customers through its stores and online than through off price retailers.
Levi’s teamed up with model Chanel Iman and New York Giants player Sterling Shepard during the quarter to create an exclusive drop, launching limited merchandise, for e-commerce retailer Amazon’s fashion line.
“We only sell to that (off price) channel ... the distressed inventory that we’re trying to clear. We don’t think its good for the brand,” Bergh said.
Jane Hali & Associates analyst Jessica Ramirez said in the long run, Levi’s direct-to-consumer model would yield results, but issues in the wholesale business remain a concern.
Revenue from the direct-to-consumer business in the United States rose 7% in the quarter ended Aug 25, driven by the strength of Levi’s flagship brand, while that from wholesale declined 4%.
Overall, the wholesale business grew only 1%, drawing strength from Europe and Asia.
Net income attributable to the company fell to $124.5 million, or 30 cents per share from $130.1 million, or 33 cents per share, a year earlier.
Excluding one-time items, the company earned 31 cents per share, three cents above expectations.
Net revenue rose 3.8% to $1.45 billion, compared with the average estimate of $1.44 billion projected by analysts, according to IBES data from Refinitiv.