Written by Deborah Mary Sophia and Katherine Masters
(Reuters) – Levi Strauss & Co. on Thursday predicted full-year sales and profits to fall short of Wall Street expectations and cut staff at the global company by 10% as the denim maker looks to rein in costs amid a weak wholesale business. announced a 15% reduction.
The company's shares fell more than 5% in extended trading.
Levi's blamed the weak outlook on plans to exit the Denizen brand this year and cut off-price sales, which also led to lower fourth-quarter sales.
The aftermath of last year's inventory glut and the squeeze on low-income consumers are weighing on the company's wholesale channels, canceling out growth in its direct-to-consumer (DTC) business driven by strong demand from higher-income consumers.
“Value-conscious consumers are under pressure…While there is some momentum heading into 2024, our outlook is cautious,” chief financial and growth officer Harmit Singh said in an interview. ” he said.
Levi's overall wholesale business accounted for about 62% of net revenue in 2022, but sales fell 3% on a constant currency basis in the quarter ended Nov. 26.
The phasing out of the Denizen brand, which is cheaper and has lower margins than the Levi's brand, will support the company's premiumization plans, expanding its range of higher-end denim and adding other categories such as sportswear. Mr. Singh said he would.
Headcount reductions are expected to take place in the first half of 2024, and combined with more DTC-focused efforts, are expected to result in net cost savings of $100 million in 2024.
The company expects to incur costs of $110 million to $120 million related to layoffs this quarter.
Levi currently has approximately 20,000 employees worldwide, including approximately 5,000 corporate employees.
The company expects net sales growth of 1% to 3% in fiscal 2024, compared with analysts' expectations for a 4.7% increase to $6.49 billion, according to LSEG data.
Levi's forecast adjusted earnings per share of $1.15 to $1.25, below expectations of $1.33.
(Reporting by Deborah Sofia in Bengaluru; Editing by Shriraj Kaluvila)
