© Reuters. The Levi Strauss & Co. label is seen on clothes in a store at the Woodbury Common Premium Outlets in Central Valley, New York, U.S., February 15, 2022. REUTERS/Andrew Kelly/File Photo
(Reuters) -Levi Strauss & Co cut its annual profit forecast on Thursday, in a sign that higher costs were weighing on the denim maker’s margins at a time when its wholesale sales remained under pressure in North America.
Shares of the company fell about 5% in extended trading.
Customers are turning more cautious on spending on pricier discretionary items such as apparel, home goods and electronics as fears of a recession mount in the United States.
The Dockers and Denizen brands’ owner said it now expects adjusted profit to be between $1.10 and $1.20 per share for the fiscal year 2023, compared with a range of $1.30 to $1.40 per share it previously expected.
Annual reported net revenue is expected to increase 1.5% to 2.5% from a year earlier, the apparel maker said, narrowing its previous forecast range of 1.5% to 3%.
Industry peer American Eagle Outfitters (NYSE:) had also cut its full-year revenue forecast in May amid weak consumer spending environment.
San Francisco-based Levi’s (NYSE:) has been grappling with higher costs, more promotions and supply chain snarls despite multiple price hikes on its products.
Revenue in its higher-margin direct-to-consumer channel increased 13% for the second quarter, while its wholesale channel, which includes sales to retailers like Target (NYSE:) and Nordstrom (NYSE:), posted a 22% decline as distributors tightened their inventories in North America and Europe.
Sales in Americas declined 22%, while that in Europe fell 2%.
The company posted a net loss of $1.6 million for the quarter ended May 28, compared with a net income of $49.7 million a year earlier.
Its quarterly revenue fell 9.1% to $1.34 billion, roughly in-line with analysts’ expectations, according to Refinitiv data.