Levi Strauss tops result estimates as pricing actions counter tariff impact

By Neil J Kanatt

Jan 28 (Reuters) – Levi Strauss beat Wall Street estimates for fourth‑quarter sales and profit on Wednesday, helped by growth in direct-to-consumer sales channels and a sharper focus on popular styles as the denim maker fights tariff-related challenges.  

Shares of the company were up 2% in extended trading.

The retailer sources most of its products from Bangladesh, Cambodia and Pakistan, which face high U.S. tariffs. To soften the hit, it limited its holiday season selection to products most popular among Gen Z and younger millennials, raised prices modestly, secured holiday inventory early, and leaned heavily on direct‑to‑consumer channels that support sales at full price. 

Levi expects an impact of about 150 basis points on annual gross margin, which it aims to fully mitigate.

“We’ll fully offset the tariffs through pricing actions, most of which we have implemented in the U.S., (and) some overseas,” CFO Harmit Singh told Reuters on Wednesday.

Higher full-price sales and lower product costs through vendor negotiations and operational efficiencies will also help minimize the hit, Singh added.

The company has exited lower‑margin businesses such as Denizen and Dockers in North America and introduced its premium Blue Tab line to tap higher‑income shoppers.

Quarterly net revenue rose 1% to $1.77 billion, topping estimates of $1.71 billion. Adjusted earnings of 41 cents per share also beat expectations, according to LSEG data.

However, revenues in the U.S. segment fell 7%, as inflation and economic uncertainty pressure consumer spending among low- and mid-income earners in the U.S.

“Weaker sales in the U.S. could point to falling demand as uncertainty dampens interest in discretionary purchases,” eMarketer analyst Rachel Wolff said.

Revenue in Europe and Asia rose 8% and 2%, respectively, while overall DTC revenues increased 8%.

Levi expects annual adjusted earnings per share in the range of $1.40 to $1.46, below analysts’ average estimate of $1.48, hurt by a 4-cent hit from a higher tax rate.

(Reporting by Koyena Das and Neil J Kanatt in Bengaluru; Editing by Leroy Leo)