Levi Strauss shares slump 11% as group mulls Dockers sale, slashes sales outlook

Investing.com -- Levi Strauss (NYSE:LEVI ) announced it has put its Dockers brand under review for a possible sale and lowered its group-wide full-year revenue forecast, sending its shares down sharply in premarket US trading on Thursday.

In a statement, the San Francisco-based jeans maker said it had taken the decision to evaluate "strategic alternatives" for Dockers in order to address "the areas where we've underperformed."

Levi Strauss added that it has not set a deadline or definitive timetable for the completion of the review process, noting that there "can be no assurance" it will lead to any transaction or "particular outcome."

Since being introduced by Levi Strauss in 1986, Dockers has made khaki garments that have become synonymous with business casual attire. But the segment has struggled recently, posting a 15% drop in net revenue year-on-year in the third quarter ended in August.

Levi Stauss also reduced its annual sales forecast, guiding for revenue growth of 1% compared to a prior outlook of 1% to 3%. For the current quarter, sales are seen increasing in the mid-single-digits.

Speaking in a post-earnings call, Chief Financial Officer Harmit Singh said the lowered projections were due to headwinds facing Dockers as well as weakness in its Chinese and Mexican wholesale operations.

"I am confident in our plans to address these areas, and while we recognize that the benefits from these actions will take time to fully materialize, we are beginning to see improvements as we step into [the fourth quarter]," Singh said.

Levi Strauss reported fiscal adjusted earnings of $0.33 per diluted share on revenue of $1.52 billion, compared with Wall Street forecasts for for $0.31 on revenue of $1.55 billion. 

Analysts at Stifel said the quarterly returns featured "strong indicators" that Levi Strauss's brand remains healthy, including an acceleration in its direct-to-consumer business.

The analysts said they are taking a "more conservative view" on the company's future revenue and income, but continue to "see potential for [the] business to over-deliver."

"While frustrated that growth is not meeting potential near-term, we continue to see shares [as] undervalued," the Stifel analysts said.

(Yasin Ebrahim contributed reporting.)

Source: Investing.com