Levi Strauss stock falls, as new campaign with Beyoncé outweighed by subdued sales forecast

By Bill Peters

Management also says it's evaluating 'strategic alternatives' for its Dockers brand

Shares of Levi Strauss & Co. slid after hours on Wednesday after the jeans maker tempered its full-year sales forecast, even as management said its core Levi's brand was leading the way toward improvement and called out potential gains from its new partnership with Beyoncé.

Management also said it was evaluating "strategic alternatives" for its Dockers brand, as the company tries to cut costs and draw inflation-embattled shoppers with new denim offerings.

Levi Strauss (LEVI) said it expects sales for its full fiscal year, which ends in November, to grow approximately 1%. That's a bit more subdued than the forecast the company offered in June for sales growth of 1% to 3%.

The company said it expects adjusted earnings per share to land "at the midpoint" of its prior forecast for $1.17 to $1.27.

Shares fell 8.5% after hours on Wednesday.

Chief Executive Michelle Gass said in a statement that the company's underlying fundamentals were getting stronger, helped by 5% growth by its Levi's brand. She also said its direct-to-consumer business, which handles online sales and sales at its own stores, also saw double-digit growth, and a solid showing in the U.S. and improvement in Europe.

"Looking to Q4 and beyond, we will amplify our focus on the Levi's brand, exemplified by our new campaign with Beyoncé and an innovative product pipeline designed to build momentum with our fans around the world," she said.

Levi's on Monday announced the campaign with Beyoncé - whose album "Cowboy Carter," released this year, has a song named "Levii's Jeans." That campaign, Levi's said in a release, will reinterpret "several of the Levi's brand's most iconic advertisements" with the filmmaker Melina Matsoukas.

"Based on the continued strength of the Levi's brand, we expect sequential progression to continue into Q4 as we accelerate revenue and profitability," Chief Financial Officer Harmit Singh said in Levi's earnings release on Wednesday.

"We are also taking decisive actions to address the areas where we've underperformed, including our decision to evaluate strategic alternatives for Dockers," he continued. "We remain confident in our ability to drive long-term shareholder value."

The company reported third-quarter net income of $20.7 million, or 5 cents a share, compared with $9.6 million, or 2 cents a share, in the same quarter last year. Adjusted for goodwill, severance and other charges, Levi Strauss earned 33 cents a share.

Sales came in at $1.52 billion, compared with $1.51 billion in the prior-year quarter.

Analysts polled by FactSet expected adjusted earnings of 31 cents a share, on revenue of $1.55 billion.

-Bill Peters

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10-02-24 1642ET

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