(Bloomberg) -- Denim maker Levi Strauss & Co. narrowed its full-year revenue outlook to the bottom end of its previous range, sending shares down sharply in extended trading.
Net revenue is expected grow about 1% in the company’s current fiscal year, compared with a previous range of 1% to 3%. Sales in the fiscal third quarter, which ended Aug. 25, were slightly short of the average analyst estimate, while Levi’s Americas division posted a revenue decline in the period.
The shares fell 9.7% at 5:44 p.m. in extended New York trading. The stock has gained 27% this year through Wednesday’s close, outpacing the advance of the S&P Total Market Index over the same period.
Levi is pushing to generate more sales through its own channels, and while it’s making progress on that front, its wholesale business is deteriorating, declining 6% in the latest quarter from a year earlier. The company wants shoppers to go to Levi’s own stores, website and app for sales as the department stores that have traditionally been crucial for big apparel brands lose favor.
Chief Executive Officer Michelle Gass said the company’s namesake brand is gaining ground, and touted “another great quarter of strength” for the direct-to-consumer segment. That division, which includes Levi’s own website and stores, posted 10% growth.
“The revenue miss is causing some knee-jerk pressure in the in the stock, but the core Levi’s brand performed well,” Vital Knowledge analyst Adam Crisafulli wrote in a research note. He added that margins, which outperformed expectations, “were a bright spot.”
On the company’s call with analysts, Chief Financial Officer Harmit Singh said that lower-than-expected sales in the quarter were due in part to weakness of the Mexican peso against the dollar along with soft performance in China and the impact of cybersecurity incident in June.
He also cited weakness at the Dockers brand. Levi announced Thursday it’s reviewing options for Dockers, “which could include a potential sale or other strategic transaction,” and it has hired Bank of America as a financial adviser in the process. The brand’s sales declined 15% to $73.7 million in the latest quarter. Gass told analysts that Dockers “has underperformed for some time” and the company wants to sharpen its focus on its namesake and Beyond Yoga brands.
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.
(Corrects name of underperforming brand eighth paragraph.)
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