American clothing firm Levi Strauss & Co has reported net revenues of $1.5 bn in the third quarter of fiscal 2023 (Q3 FY23), maintaining consistency with the prior year on a reported basis. However, when adjusted for constant currency, there was a 2 percent decline compared to Q3 FY22.
A significant surge was noted in direct-to-consumer (DTC) net revenues, which rose by 14 percent on a reported basis and 13 percent on a constant-currency basis. This growth was underpinned by a consistent performance across company-operated mainline and outlet stores, coupled with a robust e-commerce sector, which alone witnessed a growth of 19 percent on a reported basis. Notably, DTC contributed to 40 percent of the total net revenues for the quarter.
However, the wholesale net revenues declined by 8 percent on a reported basis and 10 percent when adjusted for constant currency. While Asia and Latin America reported growth, it was offset by declines in the more established markets of North America and Europe, the company said.
Revenues in the Americas experienced a 5 percent dip on a reported basis in Q3 FY23, and a slightly steeper 7 percent when adjusted for constant currency. Europe reported a 2 percent decline in net revenues on a reported basis, which increased to 6 percent on a constant-currency basis. However, excluding Russia from the equation, the decrease was at 3 percent on a constant-currency basis. Asia, contrasting with other regions, reported an uptick with net revenues growing 12 percent on a reported basis and 18 percent when adjusted for constant currency.
Furthermore, the company’s ‘other brands’ category saw an increase of 12 percent on a reported basis in Q3 FY23 and 9 percent on a constant-currency basis. Within this category, Dockers saw a growth of 9 percent on a reported basis, while Beyond Yoga showcased an impressive 25 percent growth on both reported and constant-currency bases.
However, in Q3 FY23, the operating margin took a hit, plummeting to 2.3 percent from the previous 13.1 percent reported in Q3 FY22. The gross margin also decreased by 130 basis points, standing at 55.6 percent. The selling, general and administrative expenses saw an increase, reaching $715 mn, compared to the $664 mn in Q3 FY22. The quarter concluded with a net income of $10 mn, a significant drop from the $173 mn reported in Q3 FY22. The adjusted net income stood at $112 mn, compared to $161 mn in the same quarter of the previous fiscal. Lastly, the diluted earnings per share settled at $0.02, a decrease from $0.43 in Q3 FY22, the release added.
“In the third quarter, we delivered double-digit growth in our direct-to-consumer business, driven by strong comp-store gains, which helped offset continued softness in the wholesale channel, primarily in the US,” said Chip Bergh, President and Chief Executive Officer of Levi Strauss & Co. “We are focused on the levers within our control and the actions we took in the third quarter are beginning to drive improvements in US wholesale trends.”
