Levi Strauss Profits Beat Expectations Despite Tariff Headwinds
Levi Strauss & Co. reported fiscal third quarter earnings today that exceeded Wall Street’s projections, driven by strategic price increases and a shift in sales channels despite ongoing challenges from tariffs.
The company’s gross margin increased to 61.7%, a 1.1 percentage point rise from the same period last year, surpassing the 60.7% analysts anticipated. Revenue reached $1.54 billion, also exceeding expectations of $1.50 billion. CEO Michelle Gass explained that the company has been implementing “targeted actions” on pricing without impacting demand, stating, “As we’ve been taking these targeted actions, we’ve not seen an impact to demand.” She emphasized Levi’s commitment to maintaining quality and value, noting the brand must “earn that every day.”
A key factor in the positive results is a move away from wholesale partnerships towards direct-to-consumer sales through Levi’s own stores and website, which offer higher margins. Demand remains “really strong,” according to finance chief Harmit Singh, with price increases contributing, but not being the primary driver of revenue growth. This performance has led Levi Strauss to raise its full-year sales outlook to a 3% increase, a significant jump from previous guidance of 1-2% growth. The strength in denim is a key indicator of consumer spending, and can often reflect broader economic trends, as discussed by the Bureau of Economic Analysis.
Despite the positive report, shares of Levi Strauss fell more than 6% in extended trading. The company now anticipates full-year adjusted earnings per share between $1.27 and $1.32, and expects to return to its original gross margin outlook, contingent on current tariff rates remaining stable. Levi’s is also actively diversifying its product offerings, with tops now accounting for nearly 40% of the business, and women’s apparel up 9% during the quarter – a strategy detailed in their investor relations section.
Company officials stated they will continue to monitor macroeconomic volatility and take a “prudent” approach to the remainder of the year.
