Levi Strauss expects annual profits to be lower than estimates due to tariffs

Written by Saviyata Mishra

(Reuters) – Levi Strauss raised its full-year profit forecast on Thursday, but it fell short of Wall Street expectations due to costs linked to the United States. Import tariffsSending shares of the denim maker down 7.5% in extended trading.

The retailer took steps, including securing about 70% of holiday inventory ahead of schedule and raising prices modestly, to cushion the blow from the US president, executives said on a post-earnings call. Donald TrumpChanging tariff policies.

However, these efforts will not fully offset the pressure, as Q4 gross margin is expected to reach 130 basis points.

“We probably brought in a little more inventory than we normally would at this point,” Chief Financial Officer Harmeet Singh told Reuters, adding that this was done to protect the holiday quarter.

Levy now expects fiscal 2025 adjusted earnings per share to be in the range of $1.27 to $1.32, up from its previous forecast of $1.25 to $1.30 per share. The midpoint is below the $1.31 estimate, according to data compiled by LSEG.

Expectations assume that US tariffs will remain at 30% for China and 20% for other countries until the end of the year.

“Three months ago, investors could have looked and imagined that denim was resistant to tariffs, but now it has become clear that even jeans cannot withstand trade uncertainty, and the company appears less immune than expected,” said Michael Ashley Schulman, CIO at Running Point Capital Advisors.

Levi pivoted to full-price sales through its direct-to-consumer channel, expanding its product offerings and maintaining strict limits on SKUs, an industry term for inventory.

Merchandise levels jumped 12% in the reported quarter compared to last year.

The company imports the bulk of its products from South Asia, including Bangladesh, Cambodia and Pakistan, countries facing high tariffs under the Trump administration.

However, Levi’s beat Wall Street estimates for third-quarter sales and profits thanks to strong demand for its wide-leg jeans in Europe and the Americas.

It reported a 7% increase in net revenue for the quarter ended Aug. 31 to $1.54 billion, beating analysts’ estimates of $1.50 billion, according to data compiled by LSEG. Adjusted earnings came in at 34 cents per share, compared to an estimate of 31 cents per share.

(Reporting by Saviyata Mishra in Bengaluru; Editing by Pooja Desai)