Levi sees revenue growth offsetting most of tariff impact

Levi Strauss & Co. jumped Friday after raising its revenue outlook, with the maker of 501 jeans expecting sales growth to outweigh the effect of President Trump’s tariffs.

The company said Thursday it now sees revenue rising between 1% and 2% for the current fiscal year — above the average analyst estimate and up from a previous view that sales would decline 1% to 2%.

Levi also slightly lowered its guidance for gross margin because of tariffs, which the company factored in as 30% for products imported from China and 10% for the rest of the world.

The shares jumped in morning trading in New York. The stock had advanced 14% so far this year through Thursday’s close.

The results suggest that Levi’s efforts to branch into new products and categories — part of what the company calls the “head-to-toe denim lifestyle” — is paying off.

Led by Chief Executive Officer Michelle Gass, Levi has sought to expand its offerings beyond its traditional denim pants, and its lineup now includes caps, aprons and backpacks. It’s collaborating with Nike Inc. to sell denim Air Max 95 sneakers. Levi is also looking to boost sales through its own stores and website.

In a call with analysts Thursday afternoon, Harmit Singh, chief financial and growth officer, attributed the company’s strong performance to its “laser focus” on the core Levi’s brand and its direct-to-consumer strategy.

“Our e-commerce business is now a profitable business,” he said. “It used to be a drag.”

Jeans remain at the top of the company’s bestsellers, but it’s making progress selling polo shirts and T-shirts for men, and jackets, dresses and tank tops for women. The company said it has seen a higher sell-through of its full-priced products.

“The brand is resonating with millennials and Gen Z, and growth is accelerating in women’s and new categories, fueled by direct-to-consumer and an expanding wholesale business,” said Bloomberg Intelligence senior analyst Mary Ross Gilbert.

On one resale platform, the blue sneakers from Levi’s collaboration with Nike are already selling for $339 to $999.

The effect of tariffs on profitability, excluding mitigation efforts, is expected to be $25 million to $30 million through the end of the year, Singh told Bloomberg News in an interview.

Revenue for the quarter ended June 1 rose 6% to $1.4 billion, beating the average estimate of analysts. On an annual basis, sales grew for a fifth straight quarter, while Wall Street had expected a decline.

More than half of Levi’s U.S. merchandise needs for the rest of the year have already been imported into the country, Singh said. The company has tried to mitigate the effect of tariffs by making “targeted” pricing changes, diversifying its supply chain and negotiating with vendors.

Earlier this year, Levi was one of the first big apparel companies to report earnings after Trump announced sweeping tariffs April 2.

The company’s previous guidance didn’t factor in tariffs, but since then, a number of competitors have flagged their expected effects along with general consumer caution.

American Eagle Outfitters Inc. pulled its guidance altogether, citing discounting and excess inventory among other issues. Shares of Gap Inc. plunged in late May after the company projected a tariff hit of as much as $300 million.

Meier writes for Bloomberg.