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(Reuters) – Levi Strauss & Co (NYSE:LEVI) cut its full-year profit forecast on Thursday, as decades-year high inflation hits consumer spending and a strengthening U.S. dollar adds to worries alongside higher costs.
Shares of the company fell about 4% in extended trading after the company also missed third-quarter revenue estimates.
Consumers are shifting their focus away from higher-priced products and clothes to essentials due to rising inflation, affecting Levi’s and other apparel makers.
“Inflation is definitely something that consumer is concerned about,” said Jessica Ramírez, analyst at Jane Hali and Associates, adding people would be more concerned with where they spend their dollars going into the holiday season.
The jeans maker, which has been battling supply chain disruptions since the pandemic began, now further strained due to the Russia-Ukraine war, has been raising prices of its denims 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 other U.S. companies such as Nike Inc (NYSE:NKE) and Coca-Cola (NYSE:KO) Co, 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%.
However, excluding items, the company earned 40 cents per share in the third quarter, above analysts’ estimate of 37 cents, according to Refinitiv data.
