NEW YORK (AP) — Levi Strauss & Co. reported a 4.1% drop in third-quarter profits on Tuesday as the denim giant wrestles with a weak business at its wholesale accounts in the U.S.
The earnings report comes eight months after Levi's returned to the stock market amid increasing competition and a changing retail landscape.
Under its CEO Chip Bergh, the San Francisco company has been refashioning its brand and further expanding online. It's also been juggling between selling to low-end and high-end stores. Recently, it expanded a test with discounter Target Corp. It's also further expanding outside of the U.S.
During a phone interview with The Associated Press Tuesday, Bergh acknowledged that sales at traditional department stores continue to be weak but he pointed to a strong online business.
"Our strategy to diversify is working," said Bergh. "The Levi's brand is hot."
The company said that earnings for the third quarter were $124.5 million, or 30 cents per share, in the three-month period that ended Aug. 25. That compares with $129.58 million, or 33 cents per share, in the year-ago period.
Adjusted for one-time gains and costs, the earnings came to 31 cents per share.
The results beat Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 27 cents per share.
The jeans maker posted revenue of $1.45 billion in the period. That compares with $1.39 billion in the year-ago period.
In the Americas, net revenue fell 3% due to a decline in the wholesale business, offset in part by growth in its online business. Direct-to-consumer net revenues growth of 9% reflected the Levi's brand's strength in the region.
The decline in wholesale primarily reflected a Dockers line revamp in the second half of 2018 and reduced shipments to the off-price chains like T.J. Maxx and Ross Stores in 2019. It also reflected the impact in 2019 of a pending acquisition of a South American distributor. Bergh told The Associated Press that Levi's doesn't produce clothing for the off-price retailers as other companies do.
In Europe, net revenue increased 14%, while in Asia, net revenue was up 9%.
Elements of this story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on LEVI at https://www.zacks.com/ap/LEVI