Levi Strauss & Co., a manufacturer of jeans and denim, stated on Monday that it has enough product in the United States to get through the current quarter without suffering a significant impact on margins, but that it needs to “see where the dust settles” in order to fully assess the impact of President Donald Trump’s proposed tariffs.
Additionally, as the business attempts to manage the possible economic disruption, management stated that it will examine possible supplier options and cost-cutting measures and that it had the flexibility to raise some prices if necessary, or at the very least maintain them high.
Monday after hours saw a 7.4% increase in shares.
“We do believe that the brand, especially given the health of the brand, that there is pricing power there,” Michelle Gass, the CEO of Levi’s (LEVI), stated on Monday’s results call. “But if we do anything, it’ll be very surgical.”
She also praised the brand’s higher-end offerings and stated that the business had flexibility to experiment with prices in its own retail locations and online, which are areas it has prioritized.
“The consumer is actually increasing prices,” she stated. “They buy up into more premium products, so that’s an opportunity.”
With adjusted earnings of $1.20 to $1.25 per share, the company stated that it still anticipates a 1% to 2% decline in sales for its fiscal year, which ends in November. According to Levi’s, such prediction did not account for any impact from “the recent tariff announcements.”
During the call, Harmit Singh, the company’s chief finance and growth officer, stated, “We are the process of scenario planning and determining different mitigation strategies,” “We recognize this is a quickly evolving macro situation, and we have to see where the dust settles to give you the guidance that is going to be as helpful to you as possible.”
However, he stated that he anticipated “minimal impact” on the company’s margins in the second quarter because the majority of the spring and early summer products were already available in the United States.
Levi’s reported $1.53 billion in fiscal first-quarter sales, a 3% increase over the previous year. It declared 38 cents in adjusted earnings per share. Levi’s earnings report did not include $67 million in sales from Dockers, which the firm now refers to as “discontinued operations.”
Analysts surveyed by FactSet predicted that Levi Strauss would report adjusted earnings of 28 cents per share for the first quarter, which concluded on March 2, prior to the results announcement and the disclosure pertaining to Dockers. They anticipated $1.54 billion in sales.
“While we recognize that we are operating in an uncertain environment, our global footprint, strong margin structure and agile supply chain position us to navigate the balance of the year and beyond,” Gass stated in the release of Levi’s earnings.
In an attempt to reduce expenses and concentrate more on more recent denim products, such as jeans and tops, the corporation has been attempting to sell its Dockers division. Levi’s has tried to retain inflation-fatigued consumers’ interest with a partnership with Beyoncé and more efforts to appeal to women.
As markets continue to be shaken by Trump’s fresh tariffs announced last week, Levi’s reported the outcomes. In the meanwhile, the European Union may target jeans for harsher trade reprisal.
In a report last week, Morningstar analyst David Swartz stated that Trump’s tariffs had “significant implications” for apparel manufacturers. He pointed out that almost all of the apparel offered in the United States is imported, primarily from Asia.
In its most recent annual report, Levi’s stated that it sourced its goods from producers in almost 30 countries during the previous fiscal year. According to that report, no single nation accounted for more than 30%. According to the corporation, it sources its goods from Europe, Africa, the Americas, including the United States, and North and South Asia. And it said that of the items it sells in the U.S., “less than 1% are directly sourced and manufactured in China.”
Prior to Trump’s declaration, Levi’s predicted that its fiscal year sales would decline. In the month of January, management stated “there continues to be a lot of uncertainty related to the macro environment, potential tariffs, changes in the tax code, as well as worsening foreign exchange.”
