Levi sees revenue growth offsetting most of tariff impact
The company’s previous guidance did not factor in levies, but since then, a number of competitors have flagged the levies’ impact along with general consumer caution
[NEW YORK] Levi Strauss jumped in late trading after raising its revenue outlook, with the maker of 501 jeans expecting sales growth to outweigh the impact of US President Donald Trump’s tariffs.
The company now sees revenue up between 1 per cent and 2 per cent for the current fiscal year, above the average analyst estimate and up from a previous view that sales would decline 1 to 2 per cent. Levi also slightly lowered its guidance for gross margin due to tariffs, which the company factored in as 30 per cent for products imported from China and 10 per cent for the rest of the world.
The shares jumped 7.5 per cent at 4.40 pm in extended New York trading. The stock has advanced 14 per cent so far this year.
The results suggest that Levi’s efforts to branch into new products and categories, part of what the company calls the “head-to-toe denim lifestyle”, are paying off. Led by chief executive officer Michelle Gass, Levi has sought to expand its offerings, which include everything from caps to aprons. It’s collaborating with Nike to sell denim Air Max 95 sneakers, while looking to boost sales through its own stores and website.
Tariffs’ impact on profitability, excluding mitigation efforts, is expected to be US$25 million to US$30 million to the end of the year, Levi’s chief financial and growth officer Harmit Singh said.
Revenue for the quarter ended Jun 1 rose 6 per cent to US$1.4 billion, beating the average estimate of analysts. On an annual basis, sales grew for a fifth straight quarter, while Wall Street had expected a decline.
More than half of Levi’s US merchandise needs for the rest of the year have already been imported into the country, Singh added.
Earlier this year, Levi was one of the first big apparel companies to report earnings after Trump announced sweeping tariffs on Apr 2. The company’s previous guidance did not factor in tariffs, but since then, a number of competitors have flagged the tariffs’ impact along with general consumer caution.
American Eagle Outfitters pulled its guidance altogether, citing discounting and excess inventory among other issues, while shares of Gap plunged in late May after the company projected a tariff impact of as much as US$300 million. BLOOMBERG
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