Levi Strauss cuts 2022 profit forecast on inflationary pressures, strong dollar

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Consumers are increasingly prioritizing their spending on essentials and shifting focus away from higher-priced products and clothes due to high inflation, affecting Levi’s and other apparel makers such as Abercrombie & Fitch Co and Gap Inc (NYSE:GPS).

The jeans maker, which has been battling supply chain disruptions since the pandemic began and now further strained due to the Russia-Ukraine war, has been raising prices of its denims as Levi’s aims to battle rising costs.

Levi’s said continued supply chain disruptions, primarily in the United States, resulted in estimated missed sales of about $30 million to $40 million in the reported quarter.

The Dockers and Denizen brands’ owner, like many other U.S. companies such as Nike Inc (NYSE:NKE) and Coca-Cola (NYSE:KO) , has flagged global currency headwinds.

The rapidly strengthening dollar and higher product costs also caused Levi’s to post adjusted gross margin of 56.9%, down 60 basis points, compared with a year earlier.

The company said it now expects full-year 2022 adjusted profit of $1.44 to $1.49 per share, compared with its prior forecast of between $1.50 and $1.56.

Levi’s also expects full-year reported net revenue to grow between 6.7% and 7.0%, representing 11.5% to 12% net revenue growth on a constant-currency basis. Earlier, the jeans maker expected a net revenue growth of 11% to 13%.

The San Francisco-based company’s net revenue rose 1% to $1.52 billion in the third quarter ended August 28, missing analysts expectations of $1.60 billion, according to Refinitiv data.