Levi Strauss & Co. (NYSE: LEVI), the jeans maker, raised its full-year profit guidance after adjusted third-quarter earnings of $0.48 a share beat the $0.36 LSEG consensus. Revenue of $1.6bn was in line with expectations. The results came after the US close yesterday.
The shares closed yesterday at $19.51, down 4.97% from $20.53, but that fall came before the release, so it is not a reaction to the results. Volume was about 18.0m. After-hours trading was roughly flat after initially rising.
Full-year adjusted earnings per share are now guided to $1.54 to $1.56, up from $1.46 to $1.52. Much of the quarter’s beat came from $79m of refunds of US tariffs, booked in cost of goods sold, which the company described as one-off.
Levi Strauss said the refunds added $0.16 to quarterly earnings per share, but about $0.05 was redeployed into the business, leaving $0.11 net. On our arithmetic, $0.48 less $0.11 is $0.37, roughly in line with the consensus.
The reason for spending is direct-to-consumer, its own stores and websites, which make up 45% of revenue. Sales there grew 2%, comparable sales were flat and US direct-to-consumer fell 1%, while wholesale grew 6%. About $60m is being redeployed this year, around $35m of it in the fourth quarter, split roughly equally between marketing, distribution and promotions.
The shares closed at a three-month low, about 24% below the $25.53 close on the 27th of July. President and CEO Michelle Gass said of the shortfall:
While our direct-to-consumer business fell short of our internal expectations, we moved quickly to address the shortfall and are encouraged by the strength we are seeing heading into the holiday season, including in the U.S.
Michelle Gass, Levi Strauss
The guidance shows the spending. Gross margin is now expected up 130 basis points, from 10, but adjusted EBIT margin (operating profit before one-offs) is guided to about 12.1%, from 12%.
Reported revenue growth is guided to about 7%, from 7% to 7.5%, which the company attributed to currency, while organic growth was raised to about 6% from 5.5% to 6%.
Chief Financial and Growth Officer Harmit Singh said on the earnings call that the incremental expenses do not continue into 2027.
