Levi Strauss & Co. intends to eat some tariff expenses. They are revising their expectations for the year downwards. As a result, the company has revised its previous expectation of full-year adjusted earnings to between $1.25 and $1.30 per share. That’s up from an earlier outlook of $1.20 to $1.25 per share. This announcement follows the company’s impressive fiscal second-quarter results, which beat analyst expectations.
In the quarter ending June 1—before the IPO even went live—Levi’s posted a net income of $67 million. This equates to profits of 17 cents per share. That’s a big leap from last year. During that quarter, the company had a net loss of $18 million, or 4 cents per share. The company’s sales climbed to $1.45 billion, up 6% over last year’s $1.36 billion. Analysts had already expected bad news on the revenue front, with a prediction of -5.2% revenue decline.
For the time being, Levi has chosen to eat some tariff costs. This decision is evidence of their devotion to ensuring low prices and profitability for American consumers. The company only produces an estimated 1% of its products in China today. It’s now projecting tariffs will hit its business by $25 million to $30 million for the remainder of the year.
Michelle Gass, CEO of Levi Strauss noted her company’s “proactive moves” to manage expenses in an “extraordinarily challenging” quarter.
“We are doing our part. We are absorbing some of the costs. What helps is that our business is so strong,” – Michelle Gass
The firm reaffirmed its aggressive earnings expectations. This optimism is apparently based on gross margin improvement, estimated to increase by 0.8 percentage points. The rise suggests a more positive profitability picture even with possible headwinds from tariff-related costs seen.
Levi’s strong performance this quarter is a testament to its resilience in an unpredictable market landscape. The utility beats earnings expectations and keeps tariff costs to a minimum. This forward-looking approach has set it up well as it steers through significant economic headwinds.
Analysts were expecting Levi’s full-year adjusted earnings to have climbed to $1.23 a share. The takeaway After significantly lifting its guidance for the second time this year, the company has proven it’s weathering the storm. Beyond that, it’s finding innovative ways to improve its bottom line.