Despite sales gains in America and Asia, US denim supplier Levi Strauss & Co. has been forced to lower its forecast for the full year. The company, which owns the Levi’s, Dockers and, for about a year, Beyond Yoga brands, reported third-quarter revenue up 1 percent from the same period last year to $1.5 billion. At constant exchange rates, this corresponds to growth of seven percent. Growth was driven by the Levi’s and Dockers brands, direct-to-consumer business, and increases in the US, Asia and Latin America.
In terms of the Americas, Europe and Asia regions, the company generated 805 million US dollars (up three percent) in its home market, 390 million US dollars (down 19 percent) in Europe and 221 million US dollars (up 36 percent) in Asia . At the other brands, Dockers and Beyond Yoga combined, net sales increased 37 percent to $101 million.
“Despite a more difficult environment, we delivered solid results in the third quarter. The Levi’s brand grew 6 percent on a currency-neutral basis, delivering record 10-year sales in the third quarter,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co. Dockers brand net sales increased 13 percent on a currency-neutral basis in comparison to the previous year.
Disrupted supply chains, exchange rate losses, weak consumption
However, the slight growth cannot hide the fact that the overall macroeconomic situation with disrupted supply chains and weak consumer spending is also leaving its mark on Levi Strauss. Persistent disruptions in the supply chain, especially in the United States, would have resulted in an estimated loss of sales of about $30 to $40 million, which corresponds to two to three percent of growth, according to the quarterly report.
Significant losses in Europe
Europe is particularly bad, with Europe net revenues down 19 percent on a reported basis – down 9 percent in constant currencies, including a 4 percent negative impact from the suspension of operations in Russia.
Net revenues from the DTC business decreased 21 percent, down 14 percent on a currency-neutral basis. Wholesale net sales also fell 16 percent, or 5 percent in constant currency. Net revenue across all digital channels declined 18 percent and accounted for 24 percent of segment revenue for the quarter.
The Asia business is growing
In Asia, on the other hand, the company was able to grow. Net revenues increased 36 percent, up 53 percent in constant currency, based on growth in the wholesale and DTC channels and in most markets outside of China. In India in particular, Levi Strauss was able to record strong wholesale sales.
Forecast lowered for 2022
Given the more modest expectations for the fourth quarter, the company has reduced its financial outlook for fiscal 2022. Net sales growth of 6.7 to 7.0 percent is expected. In the second quarter, one had assumed eleven to 13 percent for the year as a whole.