By Juveria Tabassum
(Reuters) -Levi Strauss fell short of market expectations for second-quarter revenue on Wednesday, hurt by choppy wholesale demand in the United States.
Shares of the company were down 12% in extended trading after Levi also maintained its annual profit and revenue forecast due to an adverse foreign exchange impact, as well as steeper marketing spend heading into the back-to-school and festive holiday seasons.
Levi is pivoting to a direct-to-consumer business and prioritizing higher-margin products after an inventory glut last year caused several quarters of weakness in wholesale demand.
In the reported quarter, Levi's (NYSE:LEVI) U.S. wholesale revenue was down mid-single digits, although the company added the channel was "significantly more profitable" than last year due to improved inventory levels.
"Our consumer is proving to be resilient. They're coming into our stores and they're shopping online. There are indications … certainly there's some level of uncertainty as we look into the back half of the year and beyond," said Levi's Chief Financial Officer Harmit Singh on the post-earnings call.
However, the company executives said the Dockers brand, known for its chinos and khakis, underperformed in the quarter, hurting Levi's top line.
This undermined robust denim demand - driven by full price sales in women's clothing, as consumers shopped for denim dresses, tops and skirts.
The company reported second-quarter adjusted profit per share of 16 cents, beating expectations of 11 cents, and gross margin grew 180 basis points.
Levi added in a post-earnings call it now expects fiscal 2024 net revenue growth in constant currency to be at the upper end of its prior range of 1% to 3%.
The company also maintained its forecast for annual adjusted profit of $1.17 to $1.27 per share.
Second-quarter net revenue of $1.44 billion fell shy of estimates of $1.45 billion, as per LSEG data.