(Bloomberg) — Levi Strauss & Co.’s shares slumped after challenges abroad and declines across its home market and Dockers brand drove a cut to its full-year guidance.
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The company sees weaker sales growth for current fiscal year, expecting a gain of about 1%. It previously expected an increase of 1% to 3%.
Shares fell 11% at 9:32 a.m. on Thursday in New York. The stock had gained 27% this year through Wednesday’s close, outpacing the advance of the S&P Total Market Index over the same period.
The results show that Levi is making progress toward its goal of becoming more reliant on its own stores and e-commerce, but weakness in other areas is also holding the company back.
Levi said it’s reviewing options for Dockers, including a sale, and hired Bank of America as a financial adviser. The brand’s sales declined 15% to $73.7 million in the last period.
Chief Executive Officer Michelle Gass told analysts that Dockers “has underperformed for some time,” and the company wants to focus on its namesake and Beyond Yoga brands.
Lower-than-expected sales last quarter were partly due to the weakness of the Mexican peso against the dollar and soft performance in China, Chief Financial Officer Harmit Singh said on a call with analysts. A cybersecurity incident in June also impacted performance, he said.
Wholesale Weakness
The company is pushing to generate more sales through its own channels. Though it’s making progress on that front, its wholesale business is deteriorating, declining 6% in the latest quarter from a year earlier. The direct-to—consumer division posted 10% growth.
The San Francisco-based company is looking to spark buzz by partnering with Beyoncé. The pop star gave the brand some unexpected publicity earlier this year with a song titled “Levii’s Jeans” on her latest album.
“With the recent intro of the Beyoncé ad campaign and continued fashion tailwinds, expectations were relatively high,” wrote Citi analyst Paul Lejuez in a note.
Lejuez said that sales and guidance were “disappointing.”
–With assistance from Subrat Patnaik.
(Updates shares and adds analyst comment in the last paragraph. Previous versions corrected the name of the underperforming brand and the day of the announcement.)
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