By Ananya Mariam Rajesh

(Reuters) – Levi Strauss announced on Wednesday it is considering selling its underperforming Dockers brand and projected fourth-quarter revenue below expectations, resulting in a 10% drop in shares during extended trading.

The denim maker aims to strengthen growth in its Levi’s brand and the Beyond Yoga activewear category while initiating a strategic review of Dockers, known for chinos and khakis, which has suffered from cautious spending in Europe and the U.S.

CEO Michelle Gass mentioned on a post-earnings call, “We are narrowing our focus to realize the full potential of the Levi’s brand as well as accelerate Beyond Yoga. Accordingly, we are undertaking an evaluation of strategic alternatives for the global Dockers business.”

Levi is currently undergoing a turnaround strategy, concentrating on a tighter assortment centered on core denim clothing and enhancing sales through direct-to-consumer channels at full prices. The company has previously exited underperforming businesses, including the Denizen brand and its footwear segment, as part of cost-cutting measures that also included layoffs.

This strategy contributed to the company’s third-quarter adjusted profit per share of 33 cents, surpassing the anticipated 31 cents, based on analysts’ estimates compiled by LSEG.

For the Dockers strategic review, Levi has engaged Bank of America as its financial adviser and has not established a deadline for completion. Dockers experienced a 15% sales decline in the third quarter and accounted for roughly 5% of the total revenue reported at $1.52 billion, which fell short of analysts’ expectations of $1.55 billion.

Conversely, Levi’s sales benefitted from a push in its direct-to-consumer channel, which saw a 10% increase, driven by strong demand for women’s clothing, especially denim dresses and jumpsuits, sold mainly at full prices.

According to eMarketer analyst Zak Stambor, “Dockers is a brand that has been out of step with consumer trends for some time. She (Gass) is positioning Levi Strauss (NYSE:LEVI) to stick to what it knows best.”

Levi anticipates mid-single-digit percentage growth in fourth-quarter revenue, compared to the anticipated 7.36% growth, impacted by Dockers’ performance and a decline in consumer spending in China.

The company, which primarily imports products to the United States through its East Coast operations from Asia, has developed contingency plans to ensure timely shipments for the holiday season. U.S. East and Gulf Coast ports are currently on strike, now entering its second day, causing shipment delays. Levi has adjusted routes to the U.S. West Coast, prioritized specific ports, and opted for air freight to manage this situation.