Yahoo Finance

Denim giant Levi Strauss is trimming its full-year revenue outlook to the bottom end of its guidance, the company also saying that it is exploring a possible sale of its Dockers brand, noting that the division has underperformed in recent years, as it looks to focus on its namesake Levi's brand. Joining us now is Levi Strauss's chief financial and growth officer, Harmeet Singh, along with Yahoo Finance's executive editor, Brian Sozzi. Great to see both of you. Harmeet, let's talk about the most recent quarter because taking a look at shares today doesn't look like investors are too happy. You're seeing your stock under a bit of pressure, and I think many investors are out there trying to figure out what exactly your quarter tells us about the health and the shape of the consumer right now. So what are you seeing in terms of consumer spending trends?

Good morning, Brian and Shauna. Good to be back on the show. So, let me talk a little bit about the quarter and then the health of the consumer. Overall, you know, despite coming in at the low end of our range on revenue, our, we believe the underlying fundamentals of our business are getting stronger, and profitability is improving. So, as an example, in quarter three, sequentially, we delivered top-line growth in constant currency of 3%. The most pleasing fact was Levi's as a business was up 5%, and that was driven by Europe returning to growth, the fact that our women's businesses up low double digit, and importantly, uh the fact that, you know, we're growing and market share, both in women's and maintaining market share leadership in men's. Our profitability is also improving. You know, as CFO, one of the metrics I've started looking at is gross profit dollars less SGN, which really means that for every incremental revenue dollar, how much are you flowing into a bottom line, and that has sequentially improved and will continue to improve. We had some underperformance pieces of our business. China underperformed, uh, you know, we're taking steps to fix that. We had the underperformance in Mexico, partly driven by the fact that one of our large customers had a cybersecurity breach, we're working with them to get shipping of our, you know, units back in order, and there was underperformance of Dockers. So, we're taking real steps to try and focus on them and ensure that we're able to deliver as we communicated our quarter four, which is sequentially better, more like a mid-single digit growth quarter. To your question about the consumer, overall, we feel really good about the consumer. You know, despite the macro headwinds and the uncertainty, and that's driven by a couple of fact. Levi's was up. Globally, the denim category is having a moment. Globally, we think the denim category is growing in the mid-single digit. Um, you know, I talked about the fact that our women's business was strong. I talked about the fact that Europe returned to growth for Levi's. US has continued to grow. US, for example, in the quarter was up in the mid-single digit, and we're growing market share. The uncertainty centers around, you know, the port strike, which we hope, you know, doesn't last too long, you know, the war in the Middle East, the fact that the lower-end consumer is probably a little bit more strained, resilient overall, but still a little bit more strained. And so, you know, what we are seeing is brands and consumers are responding to real good innovation and product pipeline.