Fashion Giant Faces Challenges as Iconic Brand Struggles to Keep Up with Changing Trends
Levi Strauss & Co, the renowned denim powerhouse, is facing a dilemma as its Dockers brand continues to drag down the company’s overall performance. Despite a 5% surge in sales for its Levi’s brand, the company’s total revenue remained flat, falling short of Wall Street expectations. As a result, Levi’s shares plummeted over 8% in extended trading.
The company’s financial report revealed a net income of $20.7 million, or 5 cents per share, for the quarter ending August 25, with earnings excluding one-time items reaching $132 million, or 33 cents per share. Sales totaled $1.52 billion, a slight increase from the previous year.
However, the real story lies in the underperformance of Dockers, which Levi’s launched in 1986 as an alternative to denim. Once a staple in many consumers’ wardrobes, khakis have fallen out of favor in recent years. Levi’s efforts to revamp Dockers have resulted in too much overlap with its namesake brand, which has expanded into a lifestyle brand offering a broader range of products.
During the quarter, Dockers’ sales plummeted 15% to $73.7 million, while Beyond Yoga, the athleisure brand acquired in 2021, saw sales rise 19% to $32.2 million. Levi’s finance chief, Harmit Singh, attributed the decline to Dockers’ underperformance over the past couple of years, stating that the decision to sell the brand would improve the company’s overall margins and minimize top-line growth volatility.
Levi’s has enlisted Bank of America to lead the sale process, aiming to allow both Dockers and Levi’s to operate independently and maximize their respective values. Meanwhile, the company is making strides in growing its profitability by shifting focus to direct-to-consumer sales, resulting in a 4.4 percentage point increase in gross margin during the quarter.
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