Levi Strauss & Co (NYSE:LEVI) reported muted third quarter earnings while slashing its annual outlook again after already cutting its full year profit guidance three months ago. The iconic denim maker got dragged down by weaker shopping trends, both at department stores and big-box retailers across the U.S such as Macy’s Inc (NYSE:M), Kohl’s Corporation (NYSE:KSS) and Target Corporation (NYSE:TGT). A month ago, Target posted its first quarterly sales decline in six years due to the slowdown in discretionary spending. Target also opted for a cautionary outlook due to further decline in discretionary categories. Macy’s amplified its leaner and personalized inventory due to also grappling with discretionary softness. As the year winds down, Macy’s also expects consumers to adopt a more financially-mindful attitude. Despite beating earnings expectations with its latest quarter that ended on July 29th, even Macy’s provided a cautious outlook due to sliding sales.

For the quarter that ended on August 27th, the denim retailer made $1.51 billion in revenue, coming in short of LSEG’s consensus estimate of $1.54 billion as growth was almost flat compared to 2022’s comparable quarter when sales amounted to $1.52 billion. Levi earned only 10 million in net income, or 2 cents per share, significantly lower than $173 million, or 43 cents per share it earned during 2022’s comparable quarter. Adjusted earnings per share amounted to 28 cents, topping LSEG’s estimate of 27 cents. 

For the full year, Levi guided for net revenues to be flat to up 1% YoY, down from its previous 1.5% to 2.5% growth range. Adjusted earnings per share are now expected to be on the low-end of the previously guided range between $1.10 to $1.20. Chief Financial and Growth Officer Harmit Singh elaborated that Levi opted for a conservative guidance despite observing a positive momentum in its direct-to-consumer business and improving wholesale trends in the first part of the undergoing, fiscal fourth, quarter. 

With the restart of student loan payments that is already weighing heavily on the minds of indebted consumers pinched by inflation, along with high raising gas prices, discretionary retailers like Macy’s, Kohl’s Corporation and Target need to brace for another harmful impact, which will inevitably harm Levi simultaneously as consumers focus on their basic needs as opposed to wants. By the looks of it, even the iconic staple of fashion like denim jeans are not immune to the effects of an economic downturn.