There was a lot to like in Levi Strauss' (NYSE: LEVI) third-quarter earnings report, but weak sales performance in the U.S. wholesale business (30% of total revenue) continued to drag on the top line. Slow traffic at department stores and retail store closures caused revenue in the Americas region to fall 3% year over year. This has been the main issue weighing on the stock, which is down 22% from the closing price on its first day of trading in March.
Still, there are plenty of signs that show the core strength of the Levi's brand is holding up well. Overall, total revenue for the quarter increased by 4% year over year, driven by double-digit growth in the direct-to-consumer channel, including company-operated stores and online sales. Growing the direct-to-consumer (DTC) channel is one of management's top priorities, as it not only offsets the decline in the U.S. wholesale channel, but it also increases brand relevance in the marketplace.
Levi's store in Wuhan, China. Image source: Levi Strauss.