Levi Strauss's shares slipped 7.7% in premarket trading on Friday after the denim maker's annual profit forecast failed to meet investor expectations, as tariff-linked costs outweighed strong demand for wide-leg denims in Europe and the Americas.
The company, which capitalized on the resurgence of baggy, loose-fit apparel among Gen Z customers, raised its 2025 sales and profit forecasts on Thursday, Reuters reported.
However, it warned of a 130-basis-point hit to its fourth-quarter gross margins owing to US President Donald Trump's shifting tariff policies.
Levi Strauss sources the bulk of its products from South Asia, including Bangladesh, Cambodia and Pakistan - countries that face high tariffs under the Trump administration.
Analysts at Barclays see the Q4 guidance as "conservative" as the company has not seen any change in trends in September, nor any push-back on price increases so far, both at the consumer and retail levels.
Trump's trade policies have also pressured the margins of other retailers such as Ralph Lauren, Abercrombie & Fitch and Coach handbag owner Tapestry.
The company secured about 70% of its holiday inventory early and slightly raised prices to mitigate tariff impact and prepare for the holiday quarter, executives said in a post-earnings call.
Levi expects annual adjusted earnings-per-share in the range of $1.27-$1.32, above its prior forecast of $1.25-$1.30 per share. The mid-point is below an estimate of $1.31, according to data compiled by LSEG.
The forecast assumes US tariffs will remain at 30% for China and 20% for other countries through the year-end.
Levi's forward price-to-earnings multiple, a common benchmark for valuing companies, is 16.94, well above Abercrombie's 7.48 and American Eagle Outfitters' 11.38, per data compiled by LSEG.
