Levi Strauss & Co reported a net loss of $2m for the Q2 period ending 28 May, with its figures plunging by 103% as opposed to net the income of $50m in the same quarter last year. Meanwhile, adjusted EBIT was down by 78% to $32m.
The net revenue also saw a downward trend with a 9% fall on a reported and constant currency basis from $1.47bn to $1.34bn.
GlobalData associate analyst, Alice Price tells Just Style exclusively Europe and North America are causing the problem as both regions are underperforming in comparison to Asia.
Price continues: “Levi’s has experienced a shaky start to FY2022/2023, despite an uplift in Q1. The brand has reported a slowdown in its Q2 results and is back in decline despite a strong performance in Asia, with revenue up 27% in constant currency. Europe and North America remain a thorn in its side, as macroeconomic challenges continue to impact consumer discretionary spending, leading many to cut back on purchases or trade-down.”
She also points out that Levi is no longer the “go-to” denim brand and is a far cry from its glory days with its product range appearing out of touch with the latest styles and trends in the fashion industry.
However, direct to consumer (DTC) net revenues increased 13% on a reported basis and 14% on a constant-currency basis, driven by broad-based growth in both company-operated mainline and outlet stores and e-commerce. E-commerce increased 20% on a reported basis and 21% on a constant-currency basis reflecting double-digit growth across all segments.
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Wholesale net revenues decreased 22% on a reported and constant-currency basis as strong growth in Asia and Latin America was offset by declines in North America and Europe. Adjusting for the shift in wholesale shipments from Q2 into Q1, global wholesale net revenues were down low-double-digits on top of nearly 20% constant-currency growth in the prior year.
Asia revenues for Q2 stood out across all regions with net revenues increasing by 18% on a reported basis and 27% on a constant-currency basis, reflecting growth across almost all markets, including strong growth in China.
Meanwhile, the Americas and Europe regions saw net revenues decline by 22% and 2% respectively on a reported and constant-currency basis.
Chip Bergh, president and chief executive officer of Levi Strauss & Co, said the global denim brand’s second-quarter DTC and international results show the resilience and health of Levi’s business model globally despite a challenging environment.
Berg said: “While US wholesale remains pressured, we are pursuing initiatives to stabilise this business and drive market share gains. We are confident in our ability to navigate near-term headwinds and remain as optimistic as ever about the company’s future.”
“We achieved our Q2 expectations across key metrics, including significant progress on inventory, and the implementation of our US ERP,” said Harmit Singh, chief financial and growth officer of Levi Strauss & Co. “While we are adjusting our full-year outlook, we expect H2 revenues up mid-single-digits and a low-double-digit adjusted EBIT margin as strong growth in our large DTC and International businesses continue. As wholesale stabilises and COGS improve, our business model is uniquely positioned to generate significant financial leverage beyond 2023.”
In April, the global denim company saw its Q1 profits hit due to higher costs associated with promotional activity. Net revenues, meanwhile, grew 6% to $1.7bn on a reported basis and 9% in constant currencies.