Levi Strauss forecasts annual profit below estimates as tariffs bite
The retailer has leaned into full-price sales through its direct-to-consumer channel, broadened its product offerings and kept a tight leash on SKUs, an industry term for inventory
[BENGALURU] Levi Strauss raised its full-year profit forecast on Thursday (Oct 9) but fell short of Wall Street expectations owing to costs linked to US import tariffs, sending shares of the denim maker down 7.5 per cent in extended trading.
The retailer has taken steps, including securing about 70 per cent of its holiday inventory ahead of schedule and raising prices modestly, executives said in a post-earnings call, to cushion the blow from US President Donald Trump’s shifting tariff policies.
Still, those efforts will not fully offset the pressure, with fourth-quarter gross margin expected to take a 130-basis-point hit.
“We probably have brought in a little more inventory than we normally would at this stage,” chief financial officer Harmit Singh said, adding that this was done to protect the holiday quarter.
Levi now expects fiscal-year 2025 adjusted profit per share in the range of US$1.27 to US$1.32, up from its prior forecast of between US$1.25 and US$1.30 per share. The mid-point is below an estimate of US$1.31, according to data compiled by LSEG.
The forecast assumes US tariffs will remain at 30 per cent for China and 20 per cent for other countries to the year-end.
“Three months ago, investors could squint and imagine denim as tariff-proof, but now it’s clear that even jeans can’t button up against trade uncertainty, and the company looks less immune than hoped,” said Michael Ashley Schulman, CIO at Running Point Capital Advisors.
Levi has leaned into full-price sales through its direct-to-consumer channel, broadened its product offerings and kept a tight leash on SKUs, an industry term for inventory.
Its merchandise levels jumped 12 per cent in the reported quarter, compared to last year.
The company sources the bulk of its products from South Asia, including Bangladesh, Cambodia and Pakistan, countries that face high tariffs under the Trump administration.
Still, Levi topped Wall Street estimates for third-quarter sales and profit thanks to strong demand for wide-leg denim bottoms in Europe and the Americas.
It reported a 7 per cent rise in net revenue for the quarter ended Aug 31 to US$1.54 billion, beating analysts’ estimate of US$1.50 billion, according to data compiled by LSEG. Adjusted profit came in at 34 US cents per share, compared to an estimate of 31 US cents per share. REUTERS
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