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© Reuters. FILE PHOTO: Denims trousers are displayed at a Levi Strauss retailer in New York, U.S., March 19, 2019. REUTERS/Shannon Stapleton/File Picture
By Deborah Mary Sophia and Katherine Masters
(Reuters) -Levi Strauss & Co forecast annual gross sales and revenue beneath Wall Avenue expectations on Thursday, and mentioned it might lower 10% to fifteen% of worldwide company jobs because the denim maker seeks to rein in prices amid weak point in its wholesale enterprise.
Levi attributed the weak forecast to plans to exit its Denizen model and in the reduction of on off-price gross sales, in addition to weaker overseas foreign money exchanges. The corporate additionally missed fourth-quarter income estimates.
The fallout of a listing glut final yr and a pressured low-income client are weighing on the corporate’s wholesale channel and neutralizing the good points in its direct-to-consumer (DTC) enterprise, which has been buoyed by robust demand from higher-income customers.
“The worth-conscious client is beneath stress,” Chief Monetary and Progress Officer Harmit Singh mentioned in an interview.
Phasing out the Denizen model, which is extra cheap than Levi’s (NYSE:) Purple Tab model and sells at a decrease margin, would enable the corporate to focus extra on expanded product classes, together with lighter-weight denim and athletic put on, based on Singh.
“They wish to make (Levi’s) extra upscale and improve that status,” mentioned Rachel Wolff, an analyst at Insider Intelligence. “It is a strategic choice as they attempt to transfer up-market and enchantment to a extra premium client.”
Shares of the corporate had been down 1.6% in after-hours buying and selling.
Gross sales in Levi’s whole wholesale enterprise, which accounted for about 62% of its web income in 2022, dipped 3% on a constant-currency foundation within the quarter ended Nov. 26.
The layoffs are set to happen within the first half of 2024, and, coupled with extra DTC-focused initiatives, would generate web price financial savings of $100 million in 2024.
The corporate will take a $110 million to $120 million cost associated to the job cuts within the present quarter.
“We’re in a comfortable demand surroundings and I feel that is mirrored of their forecasts and the cost-cutting announcement,” mentioned Mari Shor, a senior fairness analyst at Columbia Threadneedle Investments. “It is a sign they do not really feel nice concerning the topline and are on the lookout for different methods to chop bills.”
Levi has about 20,000 employees globally, with roughly 5,000 company staff.
The corporate projected fiscal 2024 web income development of 1% to three%, in contrast with analysts’ estimate for a 4.7% improve to $6.49 billion, based on LSEG knowledge.
Levi’s expects adjusted per-share revenue of $1.15 to $1.25, decrease than estimates of $1.33.
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