- Levi Strauss & Co has suffered a financial decline due to increasing competition in the sportswear market and declining demand for jeans.
- The brand has had to adapt to changes in fashion trends, implementing new strategies and collaborating with other brands.
- However, promotions to get rid of overstock have affected its profit margins and the brand expects to end 2023 at a loss.
Levi Strauss & Co released its financial results and the scenario is not different from that of many other companies related to the massive sale of clothing.
According to the firm that focuses its production of jeans, in 2023 it will see a contraction in its finances because offering more promotions (even earlier than it usually does every year) and, at the same time, fighting with higher costs, is impacting its Profits.
The stock market did not take long to react and Levi Strauss shares fell 15 percent in early trading on Thursday, April 6.
The drop came even as the firm beat previous estimates in its last accounting quarter.
The problem is that he now expects to end 2023 at a loss, a different scenario from the previous estimate that spoke of an expansion of between 20 and 30 points.
changing trends
The denim or jean clothing market has been a staple in the fashion industry for decades.
However, with the rise of sportswear, the competition has become truly fierce.
As a result, traditional industry brands such as Levi Strauss, they have had to adapt to stay relevant and maintain their sales.
Skinny jeans were once the most popular style, but looser fits like mom jeans and boyfriend jeans have become more fashionable and brands have had to modify their designs.
But despite the changes, the denim clothing market has seen sales drop as people seek comfortable and functional clothing in their daily lives.
Levi Strauss has implemented some strategies, such as introducing new styles, collaborating with other brands and investing in sustainability.
Promotions are a problem for Levi Strauss
Levi Strauss’ financial report for the quarter ended February 28 says that even with a sharp rise in prices for its products, it was unable to sustain its margins as its costs rose from logistics, labor and price. of the raw material, basically cotton.
Also, because he undersold, the overstock forced Levi to offer more discounts and promotions to get rid of the items before they went out of style.
The CFO of the company said it, Harmit Singhin the statement of the financial report: “The decision to reduce inventory, especially in the United States, in a scenario of more promotions, resulted in greater pressure on gross margins.”
Levi Strauss’ other brands, in addition to Levi’s, Signature and Denizen, also did not perform well.
In this sense, the problem is that consumers with less purchasing power “are making difficult decisions and buy less or simply not buy denim,” said Bergh.
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