Levi’s cuts annual forecasts as wholesale weakness weigh

Levi Strauss & Co cut its annual forecasts for the second time last week after missing third-quarter sales estimates, reeling from hefty promotions and falling demand at wholesale channels in North America, reports Reuters.
Gloomy consumer spending has hit retailers like Macy's and Nordstrom as high prices and borrowing rates squeeze budgets, denting demand for Levi's denims bottoms, tops and cargo pants.
Unseasonably warm weather through the late summer and fall also hurt sales, particularly of men's jeans in wholesale channels where Levi has less control over product displays, according to Chief Financial and Growth Officer Harmit Singh.
"In our own stores we have a lot more buy-now, wear-now product-things like shorts, lighter denim, skirts and dresses," Singh told Reuters on a call.
Levi has struggled with declining sales at its overall wholesale business, particularly in North America, which has a higher exposure to the middle-income consumer.
"Value-conscious" shoppers earning between $50,000 and $100,000 are particularly under pressure, Singh said. This has impacted Levi's sales at retail partners such as Walmart and Target, where prices of its Signature and Denizen lines start just below $30.
Net revenue in Levi's Americas segment decreased 5 per cent, even as its direct-to-customer (DTC) business, which serves a more affluent consumer, rose 12 per cent.
"The brand is trying to sell more through DTC but overall will probably face headwinds going into the holiday season," said Michael Ashley Schulman, a partner at Running Point Capital.
Its margins were also hit by price cuts on certain denim bottoms sold to wholesale retailers like Macy's and Nordstrom in a bid to boost sales among more price-sensitive shoppers.