Key Stats for $LEVI Stock
- Price Change for $LEVI stock: -12.55%
- Current Share Price: $21.46
- 52-Week High: $24.82
- $LEVI Stock Price Target: $25
What Happened?
Levi Strauss (LEVI) stock plunged over 12% despite the denim maker reporting third-quarter results that crushed Wall Street expectations. The selloff came after management issued muted fourth-quarter guidance, citing tariff headwinds.
Levi Strauss posted adjusted earnings of $0.34 per share on revenue of $1.54 billion, both beating estimates. Revenue jumped 7% from $1.44 billion a year earlier. The company also raised full-year guidance, now expecting revenue growth of 3% instead of the previous 1% to 2% forecast.
But investors focused on the cautious fourth-quarter outlook. CFO Harmit Singh told analysts Levi expects gross margin to contract 100 basis points in Q4, driven by tariffs and the impact of lapping a 53rd week last year. Management guided to adjusted EPS of $0.36 to $0.38, below the $0.41 that analysts expected.
Singh said the full-year gross impact of tariffs before mitigation represents about a 70 basis point headwind to gross margin compared to 50 basis points previously assumed. For Q4 specifically, that translates to an 80 basis point drag and a $0.03 hit to earnings per share.
Levi updated its tariff assumptions to 30% for China and approximately 20% for the rest of the world imports. Despite these higher rates, Levi’s expects to limit the full-year gross margin impact to just 20 basis points after mitigation efforts.
Those mitigation strategies include promotion optimization, targeted price increases, vendor negotiations, and supply chain diversification.
CEO Michelle Gass said the company started raising prices on some jeans and clothes in Q3 and will hike prices more in the U.S. and other markets next year.
“As we’ve been taking these targeted actions, we’ve not seen an impact to demand,” Gass told CNBC. Singh added that demand remains “really strong” and most revenue growth isn’t coming from price increases.
See analysts’ growth forecasts and price targets for LEVI stock (It’s free!) >>>
What the Market Is Telling Us About LEVI Stock
The sharp drop in LEVI stock indicates investor concerns about margin pressure and the company’s ability to maintain momentum against a more challenging backdrop. The stock had climbed 42% year-to-date through Thursday’s close before the earnings selloff.
Levi’s delivered impressive operational performance in Q3 as gross margin expanded 110 basis points to 61.7%, a quarterly record, despite 80 basis points of tariff headwinds.
Three factors drove the expansion: favorable business mix toward higher-margin direct-to-consumer, international, and women’s sales; targeted pricing and higher full-price selling; and about 50 basis points from foreign exchange.
Direct-to-consumer revenue grew 11% driven by U.S. strength. Levi generated high single-digit comp growth, driven by increased units per transaction and higher average unit retail prices.
E-commerce surged 16% as Levi’s pushes toward its goal of e-commerce representing 15% of total sales, up from just 9% today.
Women’s revenue climbed 9% while tops grew 9%, showing progress on Levi’s strategy to evolve from a denim bottoms company to a head-to-toe denim lifestyle brand. Tops now represents nearly 40% of the business.
Geographically, the Americas experienced a 6% growth, with the U.S. seeing a 3% increase. Europe rose 5% and Asia accelerated 12% with double-digit growth in India, Japan, Korea, and Turkey. Beyond Yoga revenue increased 2% with direct-to-consumer up 23%.
For the full year, Levi’s now expects adjusted EPS of $1.27 to $1.32, up from $1.25 to $1.30 previously. The company also raised its operating margin guidance to 11.4% to 11.6% and now expects gross margin to expand 100 basis points for the year, up from 80 basis points previously.
Management emphasized that the business delivered its fourth consecutive quarter of high single-digit organic revenue growth.
LEVI is transforming into a best-in-class DTC-first denim lifestyle retailer while returning significant capital to shareholders through an accelerated share repurchase program and growing dividend.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
