Levi shares fall as it cuts its outlook
Shares of clothing specialist Levi Strauss fell 1.6% in extended trade last night after it cut its annual forecast for the second time this year.
While net income came in broadly in line at 28 cents, net revenue fell marginally to $1.51 billion, missing analysts' estimates of $1.54Bln. Levi went on to forecast revenue to be flat to up 1% in fiscal 2023, compared with a prior estimate of 1.5% to 2.5% growth. In North America, Levi Strauss has a higher exposure to middle-income consumers. This category earns between $50,000 and $100,000 and is particularly affected by higher borrowing costs and high prices. Net revenue in Levi's Americas segment decreased 5%, even as its direct-to-customer segment rose 12%.
Levi Strauss financial forecast
Clothing giant Levi Strauss has revised its financial forecast downwards for the second time this year, causing a potential decrease in its stock value on Wall Street. The company's net revenue dropped to $1.51 billion, slightly lower than the expected $1.54 billion. In addition, Levi's North America division, which serves middle-income customers, saw a 5% decline in revenue due to increased borrowing costs and high prices. However, its direct-to-customer business grew by 12%.
Levi Strauss profit margin decline
As a result, the share price is expected to open at $13.21, with a projected decline of 1.6%. Industry analysts believe that the support level at $12.80 may prevent further drops in value. Levi Strauss faced profit margin declines because it had to reduce prices on specific denim products sold to wholesale retailers. Additionally, the company has been grappling with rising costs of materials like cotton.
Levi Strauss stock
When we look at the long-term trend, Levi's stock has failed to reach its initial public offering (IPO) price of $17 per share in March 2019. If the current support level breaks, the share price could drop to levels not seen since September 2020.
Levi Strauss is not alone in facing challenges within the clothing industry. Its focus on middle-income consumers, along with the impact of rising prices and borrowing costs, has negatively impacted its performance. It is important to note that other companies in this industry are also dealing with similar issues, emphasizing the wider predicament faced by businesses operating in the same space.
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