Shares of Levi’s (Levi Strauss & Co.) dropped to their lowest level ever after expanded promotions caused the first-quarter gross margin to fall short of forecasts.
In the three months that ended on February 26, the retailer reported a gross margin of 55.8%, which was lower than the 59.3% reported at the same time last year and the 56.9% average analyst projection.
Levi’s Reports Strained Retailer Margins
Higher transportation expenses and greater promotions intended to clear off surplus inventory accumulated last year have put pressure on retailer margins in recent quarters. Levi said that inventory growth last quarter was 33%.
Levi also recorded net restructuring charges totaling $18.2 million for abandoned technology initiatives and $11.4 million for severance pay connected to employment cuts. The strategy strives to cut expenses and streamline processes.
The shares experienced their biggest decline since the company’s 2019 initial public offering when they finished down 16% on Thursday. The decline eliminated the stock’s gain from Wednesday’s close through 2023.
In the three months that ended on February 26, the retailer reported a gross margin of 55.8%, which was lower than the 59.3% reported in the same time last year and the 56.9% average analyst projection.
Higher transportation expenses, as well as greater promotions intended to clear off surplus inventory that accumulated last year, have put pressure on retailer margins in recent quarters. Levi said that inventory growth last quarter was 33%.
Levi also recorded net restructuring charges totaling $18.2 million for abandoned technology initiatives and $11.4 million for severance pay connected to employment cuts. The strategy strives to cut expenses and streamline processes.
Worst Decline Since 2019
The shares experienced their biggest decline since the company’s 2019 initial public offering when they finished down 16% on Thursday. The decline eliminated the stock’s gain from Wednesday’s close through 2023.
Nonetheless, quarterly sales beat forecasts, indicating that denim demand maintained steady even as total consumer spending shrank.
According to Chief Executive Officer Chip Bergh, Levi was the market-share leader among the crucial 18-to-30-year-old client and saw strength in the women’s jeans industry.
Compared to the $1.62 billion average forecast of analysts surveyed by Bloomberg, revenue for the fiscal first quarter came in at $1.69 billion. Excluding some factors, earnings of 34 cents per share exceeded the average forecast of 32 cents.
The first US mass-market clothing retailer to release first-quarter earnings is Levi. In the latter part of May, retailers like Macy’s Inc. and Gap Inc. will report.
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