Levi Strauss & Co. is riding the denim cycle higher — and continuing to bust out of its traditional role as a men’s jeans brand
Adjusted third-quarter profits inched up 1.5 percent to $136 million, with earnings per share of 34 cents coming in 3 cents ahead of the 31 cents analysts forecast, according to Yahoo Finance.
Revenues for the three months ended Aug. 31 rose 7 percent to $1.5 billion, in line with analyst expectations and enough for chief executive officer Michelle Gass to boost Levi’s outlook for the year.
“Our strategies are working and this is giving us the confidence to raise our top- and bottom-line guidance,” Gass told WWD. “We delivered our fourth consecutive quarter of high-single-digit organic growth. [Produced] record gross margin once again, despite the impact [of] the tariffs. This was now our 14th consecutive quarter of positive comp growth.”
Gass, who’s been CEO at Levi’s since January 2024, has been building on and sharpening the company’s efforts to expand its own direct-to-consumer business, which currently accounts for 46 percent of sales, and bring in more women shoppers.
It’s been a very step-wise approach-building quarter after quarter, but investors wanted something more at first blush and traded shares of the company down 5.8 percent to $23.10 in after-hours trading on Thursday, retrenching some after a 40 percent increase this year.
But Gass’ focus is clearly on the business.
“This pivot from being a jeans company to a head-to-toe denim lifestyle company is well underway and resonating,” Gass said. “We still have growth across genders — men’s up 5 percent, women’s up 9 percent. The brand has never been stronger.”
The company just wrapped up a yearlong marketing campaign with Beyoncé Knowles-Carter and is now featuring Grammy-nominated country artist Shaboozey in its ads, rounding out what’s been a year focused on Levi’s connection to music.
“We enter holiday with confidence,” Gass said. “It is an uncertain environment, but I will tell you that we are really focused on executing our strategy.”
That strategy has seen the company close the Levi’s footwear business, exit the lower-priced Denizen brand and sell Dockers in July.
“Now it’s all about really maximizing the potential of the Levi’s brand and the two big pivots where there’s so much opportunity,” Gass said, pointing to the women’s business and the potential in head-to-toe denim dressing. The larger company has also been repositioning the Beyond Yoga brand under Nancy Green to set it up as a bigger competitor in the active space.
Organic revenues in the Americas grew by 7 percent while Europe was up 3 percent and Asia increased 12 percent. E-commerce revenues grew 16 percent on an organic basis.
While Levi’s had been cautious on the fourth quarter, it’s growing more comfortable.
The company expects tariffs on Chinese goods coming into the U.S. will stay at 30 percent and 20 percent for other countries for the rest of the year.
Despite this, Levi’s nudged up its forecast for adjusted EPS to a range of $1.27 to $1.32, from $1.25 to $1.30. Revenue growth is expected to hit 3 percent, up from the forecast of 1 percent to 2 percent growth.
“Tariffs started impacting us in Q3,” said Harmit Singh, chief financial and growth officer. “The good news is we have record gross margins. That means we offset the tariffs and we had a beat while continuing the top-line momentum. Our latest guidance actually absorbs the incremental tariffs and raises the guidance both on the top line and the gross margin.”
Fashion brands have rushed goods to the U.S. to try to beat any further tariff increases, but Singh said the company was in good shape and inventory in the market seems generally balanced.
“For holiday — that’s November and December — we have 70 percent of what we need here,” the CFO said. “We’ve tried to balance getting product in while not building too much inventory, that’s something that we have to be very, very careful about.”