Levi Strauss trims annual profit forecast on higher costs, slowing consumer spending

(Reuters) -Levi Strauss & Co cut its annual profit forecast on Thursday, in a sign that higher costs were weighing on the denim maker’s margins at a time when its wholesale sales remained under pressure in North America.

Shares of the company fell about 5% in extended trading.

Customers are turning more cautious on spending on pricier discretionary items such as apparel, home goods and electronics as fears of a recession mount in the United States.

The Dockers and Denizen brands’ owner said it now expects adjusted profit to be between $1.10 and $1.20 per share for the fiscal year 2023, compared with a range of $1.30 to $1.40 per share it previously expected.

Annual reported net revenue is expected to increase 1.5% to 2.5% from a year earlier, the apparel maker said, narrowing its previous forecast range of 1.5% to 3%.

Industry peer American Eagle Outfitters had also cut its full-year revenue forecast in May amid weak consumer spending environment.

San Francisco-based Levi’s has been grappling with higher costs, more promotions and supply chain snarls despite multiple price hikes on its products.

Revenue in its higher-margin direct-to-consumer channel increased 13% for the second quarter, while its wholesale channel, which includes sales to retailers like Target and Nordstrom, posted a 22% decline as distributors tightened their inventories in North America and Europe.

Sales in Americas declined 22%, while that in Europe fell 2%.

The company posted a net loss of $1.6 million for the quarter ended May 28, compared with a net income of $49.7 million a year earlier.

Its quarterly revenue fell 9.1% to $1.34 billion, roughly in-line with analysts’ expectations, according to Refinitiv data.

(Reporting by Granth Vanaik in Bengaluru; Editing by Shweta Agarwal)