By Lily Meier | Bloomberg
Levi Strauss & Co. maintained a full-year outlook that excludes the impact from sweeping US tariffs that are poised to hike costs of clothing around the world.
The maker of jeans and apparel said its guidance for fiscal 2025 “assumes no significant worsening” of macroeconomic pressure on consumers, supply-chain disruptions, increased tariffs or similar factors. Levi sees organic revenue growth, which excludes items such as currency impact and divestments, growing 3.5% to 4.5% this year.
The shares rose as much as 16% — the biggest gain in a year — before paring most of the advance. The stock was up 1.6% at 10:09 a.m. in New York trading. Since US President Donald Trump announced the tariffs on April 2, the stock had declined 19% through Monday’s close.
Tariffs will have a “minimal impact” on its margins in the current quarter because most of its spring and early summer product is already in the US, the company said. It’s looking at tariffs with “urgency, but not being overly reactive,” Chief Executive Officer Michelle Gass said.
Chief Financial Officer Harmit Singh said in an interview it’s “difficult to forecast or plan at this stage” for the tariffs’ impact on consumers. He said the company created a group to analyze the tariffs while it focuses on issues it can control such as its relationships with vendors and the cost base for its products.
Related: Sneaker, Clothing Makers Sink on Tariffs Leaving Nowhere to Hide
Wall Street Steps In
With the San Francisco-based company publicly excluding the tariff impact in its financial forecasts, Wall Street analysts took up the task of modeling the impact.
“On the heels of a solid quarter, the impact of reciprocal tariffs looms large, casting uncertainty on the outlook for Levi,” said Stifel analyst Jim Duffy. “Levi’s isn’t immune to cost shocks or consumer slowdown.”
Duffy estimates that tariffs will negatively impact the company’s 2026 earnings by a low single digit percentage, absent a wider decline in consumer demand. If there’s a bigger shock to the US consumer, the tariff impact will rise to a low double digit percentage, he said.
“Uncertainty outweighs progress,” Morgan Stanley analysts wrote in a research note. They said the company’s annual guidance may be achievable, but that it’s not enough to convince them to turn positive on the stock. “Levi provided little/no tariff clarity.”
Since Levi was the first retailer to report earnings following Trump’s tariff announcement, “the market was awaiting management’s approach to forward guidance and any potential read through,” Morgan Stanley said. In lieu of that, the analysts said they were modeling a mid-single-digit percentage decrease in sales and a low double-digit percentage decline in profit due to tariffs.
Analysts noted, however, that Levi faces a more limited impact on tariffs compared with other apparel brands, due to its relatively low exposure to China and higher exposure to international sales outside the US. About 40% of Levi’s revenue comes from the US.
The news was enough, though, to turn at least one analyst bullish. JP Morgan’s Matthew Boss upgraded Levi to overweight from neutral, noting the stock’s slide over the past nine months and the company’s potential to raise prices in a tariff-induced inflationary environment.
‘Surgical’ Increases
Gass told analysts that almost 60% of revenue comes from outside of the US. It gets about 5% of its goods sold in the US from Mexico, a mid-single digit from Vietnam and 1% from China. It works with 130 facilities in China, 50 in Vietnam, 37 in Bangladesh and 36 in Sri Lanka, according to a company website listing partners in its supply chain. Gass said Levi sources from 28 countries.
If the company needs to raise prices it would be “surgical,” Gass said, and focused on new products that have resonated with shoppers.
Consumers are already gravitating toward more premium products, Gass said during the company’s call with analysts on Monday. Levi’s higher-priced products range from women’s 501 jeans costing $98 to vintage-style pants costing as much as $295 and a vintage jacket at about $600.
In the first quarter, the company posted earnings of 38 cents a share, higher than the average analyst estimate. Levi excluded its Dockers brand, that it’s looking to sell, from its results and adjusted its outlook to reflect an expected divestment.
The company is focused on bolstering its namesake brand and increasing sales through its own channels, such as its stores and website.
–With assistance from Subrat Patnaik.
(Updates headline, share trading)
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