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Levi’s Blames Supply Chain for Up to $40M in Lost Sales

Although its revenues increased compared to the prior year, Levi Strauss & Co. (LS&Co.) cut its annual sales and earnings forecast when it released its third quarter financial results Thursday.

Net revenues of $1.5 billion grew 1 percent, or 7 percent on a constant-currency basis, compared to Q3 2021 and they were also up for the Levi’s brand (+6 percent) and Dockers (+13 percent) on a constant-currency basis.

Despite the overall growth the figures were still below projections, however, and the company reduced its annual forecast for revenue and earnings “as a result of the significant incremental currency headwinds from the stronger U.S. dollar, as well as a more cautious outlook for North America and Europe due to macroeconomic conditions and ongoing supply chain disruptions.”

It now predicts that they will grow 6.7 percent to 7.0 percent, or 11.5 percent to 12 percent on a constant-currency basis, meaning they will be $6.15 billion to $6.17 billion instead of $6.4 billion to $6.5 billion.

“The continued strength of the company’s brands offset macroeconomic pressure in Europe and in the U.S., and currency headwinds globally,” it said. “Continued supply chain disruption, primarily in the U.S., also resulted in estimated missed sales of approximately $30 to $40 million, or 2 percent to 3 percent of growth.”

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“While we expect the macroeconomic backdrop to remain unpredictable over the next few quarters, our strong brands, diversified business model and proven team position us to deliver on our long-term objectives,” said Chip Bergh, LS&Co. president and CEO.  

“We have taken swift and decisive action to successfully navigate the dynamic operating environment. We are controlling discretionary spending, while maintaining our commitment to invest strategically to capitalize on our long-term growth opportunities. The strength of our brands around the globe, our diversified business model and our proven operational excellence give us confidence in our ability to manage though the industry’s near-term challenges, while achieving our long-term growth and value-creation objectives,” added Harmit Singh, LS&Co. CFO.

The Levi’s brand saw an increase in its direct-to-consumer business in Asia, the U.S. and Latin America. However, in Europe DTC net revenues decreased 21 percent on a reported basis and 14 percent on a constant-currency basis. Overall, European revenues decreased by 19 percent on a reported basis.

The company’s other brands, Dockers and Beyond Yoga, saw increased revenues of 37 percent on a reported basis and 44 percent on a constant-currency basis.

Inventory grew 43 percent from the year before, though the company said it’s “comfortable” with its position. It said inflation was one factor responsible for the rise, in addition to a new ERP rollout and getting product in earlier to mitigate delays.

Additional reporting by Jessica Binns.