Levi Strauss’ shares tumbled more than 15% on Thursday after weakness in the denim maker’s wholesale business led to downbeat second-quarter revenue. Despite denim dominating the latest trends in fashion — including the resurgence of early 2000s jorts — the San Francisco-based company said wholesale revenue fell by a mid-single digit percentage in the quarter ended May 26. The company reporting revenue growth of 8%.
“It was a good quarter but expectations were high with category tailwinds expected to drive strong results,” said Citi Research analyst Paul Lejuez, adding that the wholesale business is still holding the company back. Levi’s stock fell to $19.35 a share, down 16.
4%. Levi Strauss has been grappling with choppy demand in its wholesale business as retailers have remained cautious about restocking against the backdrop of consumers being careful with their spending. Consequently, gains from Levi’s more profitable direct-to-consumer (DTC) business, which has focused on bringing in trendier styles and selling products at full prices, fell short of boosting overall revenue in the quarter.
Global DTC revenue increased by 8%, representing 47% of total sales. “Our transformational pivot to operating as a DTC-first company is yielding positive results around the world, giving me great confidence that we will achieve accelerated, profitable growth for the rest of the year and beyond,” CEO Michelle Gass said in a statement. Levi’s shift to selling directl.
