Levi Strauss slips as tariff-related costs overshadow forecast raise

Levi Strauss & Co shares fell about 7% in premarket buying and selling on Friday as buyers targeted on the denim maker’s warning of a tariff-related hit to its fourth-quarter margin, overlooking a better annual revenue forecast.

The margin-hit forecast highlights the affect of the Trump administration’s altering commerce insurance policies on consumer-facing firms, particularly these with suppliers in nations that wouldn’t have commerce offers with Washington in place but.

While Levi’s has capitalized on the resurgence of saggy, loose-fit attire amongst Gen Z clients and raised its 2025 gross sales and revenue forecasts on Thursday, the corporate nonetheless warned of a 130-basis-point hit to its fourth-quarter gross margins.

The firm sources the majority of its merchandise from South Asia, together with Bangladesh, Cambodia and Pakistan – nations that face excessive tariffs presently.

Wall Street analysts referred to as the forecast “conservative,” with Barclays analysts saying that the lackluster forecast was regardless of the corporate not seeing any opposed adjustments in procuring tendencies in September.

The inventory “move suggests investors left the print disappointed,” Morgan Stanley analysts mentioned in a word, including that the forecast implies that the holiday-quarter gross sales “will likely look optically worse on tougher compares.”

Trump’s commerce insurance policies have additionally pressured the margins of different retailers such as Ralph Lauren, Abercrombie & Fitch and Coach purse proprietor Tapestry. However, firms that cater to extra prosperous clients face much less burden as they’ll go on the upper costs to the patron.

Levi’s has secured about 70% of its vacation stock early and barely raised costs to mitigate tariff affect and put together for the vacation quarter, executives mentioned in a post-earnings name.

It has additionally broadened its product choices, leaned into full-price gross sales and stored a decent leash on stock to offset weaker client sentiment and tariff-related pressures.

This has helped the corporate’s inventory to climb about 40% to date this 12 months. Its ahead price-to-earnings a number of, a standard benchmark for valuing firms, is 16.94, in contrast with Ralph Lauren’s 20.59, Abercrombie’s 7.48 and American Eagle Outfitters’ 11.38.