Levi Strauss & Co (NYSE: LEVI) opened nearly 10% down on Friday after reporting roughly in-line financial results for its second quarter.  

Levi’s stock down on lowered guidance

Investors are responding primarily to the future guidance that executives lowered today citing concerns of a consumer slowdown. Levi’s now forecasts 2.5% growth in revenue at the top end of the range on $1.10 to $1.20 of per-share earnings this year.

In comparison, analysts were at $1.29 per share on a 2.6% annualised revenue growth. Still, CFO Harmit Singh said on Yahoo Finance Live:

ERP is implemented, commodity pressures have abated, and H2 is being set up much stronger. DTC is up double digits and we’re taking actions to address U.S. wholesale.

Year-to-date, Levi’s stock is now down more than 30% at writing.

Notable figures in Levi’s Q2 earnings report

• Lost $1.6 million or broke-even on a per-share basis
• Had $49.7 million in net income instead a year ago
• Adjusted EPS printed at 4 cents as per the press release
• Revenue declined 9.0% year-on-year to $1.34 billion
• Consensus was 3 cents a share on $1.34 billion revenue

Inventory issues also contributed to weakness as they restricted production in the recent quarter. According to the Finance Chief, though:

Our supply chain has got a lot more efficient and inventory levels have come down dramatically. We will exit 23 much stronger, laying the foundation for a strong 24.

Wells Fargo cuts its price target on Levi’s stock

Other notable figures in the earnings report include a 13% year-over-year increase in DTC revenues. Wholesale, however, was down 22% in Q2.

Also on Friday, Wells Fargo analyst Ike Boruchow trimmed his price target on Levi’s stock to $15. In a research note, he said:

It was another tough quarter for LEVI – as mounting pressure in U.S. wholesale drove lower H2 revenue, but more notably a much larger margin/EPS cut due to needed promos and strategic price actions.

Adjusted EBIT margin tanked an alarming 750 basis points to 2.4% in the recent quarter.

More By This Author:

USD/CAD Analysis Ahead Of The US NFP And Canada Jobs Report
Ford Reports A 2.8% Hit To EV Sales In Q2 – A Reason To Sell Stock?
Tesco Share Price Has Retreated For 8 Weeks: Don’t Buy The Dip