Levi Strauss has updated its profit outlook for the fiscal year, primarily driven by tariff refunds, even as it lowered its revenue guidance following a disappointing sales quarter. The denim retailer revised its adjusted earnings per share expectation to a range of $1.54 to $1.56, up from a previous forecast of $1.46 to $1.52. Analysts had anticipated a higher range, between $1.52 and $1.59.
Levi also adjusted its net revenue growth forecast to 7%, the lower end of the earlier guidance of 7% to 7.5%. Despite this, the company projects organic revenue, excluding foreign exchange effects, to rise by 6%, reflecting the higher end of its prior estimate. Following the news, Levi’s shares fell nearly 4%.
For the fiscal third quarter, Levi reported a 4% increase in net revenues in the Americas, although U.S. revenue dipped by 1%. Operating margins improved to 13.8%, up from 10.8% in the same quarter last year, significantly aided by tariff refunds that added 4.9% to the operating margin. The tariff refunds also contributed 16 cents to the earnings per share; however, Levi reinvested 5 cents to bolster marketing efforts during the holiday season.
In its performance metrics, the company recorded net income of $168.6 million, or 43 cents per share, down from $218.1 million, or 55 cents per share, a year earlier. Total sales increased to $1.61 billion from $1.54 billion. Direct-to-consumer net revenues rose by 2%, though comparable sales remained flat, making up 45% of total net revenue for the quarter. Conversely, wholesale revenue increased by 6%. CEO Michelle Gass acknowledged the underperformance in direct-to-consumer sales and emphasized that targeted strategies are being implemented to enhance performance.
John Vandemore is set to take over as chief financial officer on November 1, succeeding Harmit Singh, who is retiring.
– Why this story matters: The adjustments in profit and revenue outlooks reflect broader trends in retail performance amid economic fluctuations.
– Key takeaway: Levi’s reliance on tariff refunds and the mixed results in its sales indicate challenges ahead, particularly in the direct-to-consumer segment.
– Opposing viewpoint: Some analysts may argue that the revenue outlook adjustment does not fully account for potential recovery strategies that Levi may implement moving forward.
