Levi Strauss reported a 17% drop in quarterly adjusted profit on Tuesday, hit by a stronger dollar, higher marketing costs, and investments in its online business, sending its shares down 6% in extended trading.
The company has been spending heavily on marketing and advertising by roping in celebrities and social media influencers, including Justin Timberlake, Snoop Dogg and super model Hailey Bieber, while increasing the number of stores and revamping its website.
The efforts helped raise sales in the second quarter, but hit margins, which fell to 53.3% from 53.95%.
The company’s adjusted earnings before interest and tax were also down 4% in the quarter, reflecting unfavorable currency impact and planned higher advertising and promotion expenses.
The company’s net revenue rose 5.4% to $1.31 billion in the reported quarter ended May 26, edging past average analysts’ estimate of $1.30 billion, according to IBES data from Refinitiv.
The company’s adjusted net income fell to $69 million from $83 million in the second quarter ended May 26.