Photo: The Rob
Levi Strauss Lifts Forecast Amid Solid Quarter and Tariff Challenges
Levi Strauss & Co. raised its full-year financial outlook on Thursday after delivering better-than-expected quarterly results, while also acknowledging growing pressure from escalating tariffs tied to the Trump administration’s trade agenda. CEO Michelle Gass said the company will absorb some of the rising costs—at least for now—but warned that could change if trade tensions continue to escalate.
“Our business is strong enough right now to weather some of the tariff impact without passing costs on to consumers,” Gass said in an interview with CNBC. “But we are closely watching trade developments.”
Tariffs Could Threaten Long-Term Pricing Strategy
The denim giant revised its full-year adjusted earnings guidance to between $1.25 and $1.30 per share, up from an earlier projection of $1.20 to $1.25. Analysts polled by LSEG had expected $1.23.
This updated forecast factors in a 30% tariff on Chinese imports, which impacts only about 1% of Levi’s production, and a 10% tariff on goods from the rest of the world—a figure that could rise as the Trump administration adjusts its reciprocal tariff plans. Countries like Bangladesh, Indonesia, and Pakistan—where Levi’s sources a significant portion of its materials—are now facing potential duties exceeding 30%, further raising concerns over supply chain costs.
The company estimates the current tariff impact will cost $25 million to $30 million for the remainder of 2025, shaving off roughly 2 to 3 cents per share in earnings.
Sales and Profits Beat Expectations in Q2
For the fiscal second quarter ending June 1, Levi’s reported:
Sales rose 6% year over year, and Levi’s shares surged 8% in after-hours trading following the earnings release.
Levi’s also raised its full-year revenue outlook, now expecting growth of 1% to 2%, compared to a previous forecast of down 1% to 2%. Analysts had projected a 5.2% decline, making this a notable revision.
Navigating Margin Pressure While Staying Competitive
Despite upbeat sales projections, Levi’s reduced its gross margin forecast by 0.2 percentage points due to expected tariff-related expenses. Gross margin is still anticipated to grow by 0.8 percentage points, supported by reduced promotions and stronger direct-to-consumer pricing strategies.
For the current quarter, Levi’s projects sales to grow 3% to 4%, versus expectations of a 4.6% decline, and EPS in the range of 28 to 30 cents, in line with analyst estimates.
“Our direct-to-consumer channels now represent over half of our business,” said Gass. “We’ve reduced underperforming segments and leaned into our most profitable strategies.”
E-Commerce Turns Profitable, Women’s Category Expands
The company’s online segment—once a costly investment—is now contributing positively to the bottom line, said CFO Harmit Singh. Gross margins reached a record 62.6%, driven by a combination of fewer markdowns, lower product costs, and an 11% rise in direct sales.
Levi’s is also seeing returns from its pivot beyond traditional denim. Revenue from women’s apparel surged 14%, and top sales rose 16% in Q2. Singh confirmed that the women’s segment is the company’s highest-margin category.
Strategic Shifts: Brand Collaborations and Business Realignment
Under Michelle Gass’s leadership, Levi’s has undergone a transformation—divesting non-core assets like Dockers, which was sold to Authentic Brands Group, and building direct customer relationships through online platforms and brand stores.
Recent brand partnerships are helping keep Levi’s relevant with younger shoppers. The company’s limited-edition drop with Beyoncé in May, tied to her Cowboy Carter tour, generated buzz and high demand. A new collaboration with Nike, launched Thursday, features a denim-styled Air Max 95, available on Levi’s website and select stores.
Momentum Strong, But Tariff Risks Loom
Levi Strauss is navigating one of the most complex retail environments in years—with strong consumer demand, digital success, and product diversification all working in its favor. However, the evolving tariff landscape remains a serious wildcard. If trade tensions escalate further, especially with major sourcing countries in Asia, Levi’s may have to reconsider its pricing strategy.
Still, the company remains optimistic. “The consumer is resilient and responding well to our direction,” said Gass. “We’re confident about what lies ahead—but we’re staying nimble.”