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Shares of the San Francisco-based apparel maker fell more than 4% in premarket trade, as it also took a hit on margins in the quarter, owing to persistent cost pressures.
Even with multiple price hikes on its products, Levi’s (NYSE:LEVI) has been unable to protect its profit margins from escalating freight, labor and raw material expenses as well as lingering supply chain disruptions, which have been made worse by the ongoing Russia-Ukraine war.
“The street is still not necessarily pleased with the cautious outlook,” said Jessica Ramirez, senior analyst at Jane Hali and Associates.
The jeans maker’s attempts to get rid of excessive inventory by offering higher discounts and promotions squeezed its profit margins. UBS analysts have noted that Levi’s promotions were up 1,500 basis points in December.
That led to adjusted gross margin of 55.8% in the first quarter, down 360 basis points.
Net income attributable to Levi’s fell to $114.7 million, or 29 cents per share, in the first quarter ended Feb. 26, from $195.8 million, or 48 cents per share, a year earlier.
However, the company’s net revenue rose about 6% to $1.69 billion in the reported quarter compared with analysts’ expectations of $1.62 billion, according to Refinitiv data.
On an adjusted basis, Levi’s earned 34 cents per share, beating estimates of 32 cents per share.
