The denim maker has been working to reduce its reliance on department stores by building out its own website and stores, but the strategy can come with unexpected hurdles.The jeans creator on Wednesday posted fiscal second quarter revenue that fell just short of Wall Street's expectations at a time whenLevi's posted better-than-expected earnings as its direct sales to consumers and cost cutting continue to bear fruit.
Sales rose to $1.44 billion, up about 8% from $1.34 billion a year earlier. However, the sales jump is coming off of an easier comparison. While Levi's posted a strong earnings beat, it only reaffirmed its full-year guidance, which was in line with estimates. The company continues to expect full-year earnings per share to be between $1.17 and $1.27, which now includes a 5 cent hit coming from the company's new distribution and logistics strategy.
The change allows Levi's to shift the responsibility of final mile delivery to third parties. It noted that it has new terms with its supplier that result in Levi's taking ownership of inventory closer to the point of shipment rather than its eventual destination. Levi's distribution network was built for a business that primarily sold to wholesalers and now it needs to change into one that's more focused on selling directly to consumers.
During the quarter, wholesale revenue grew 7%, but excluding the shift in timing of wholesale orders, sales in the channel decreased 4%.
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