Levi Strauss & Co. raised its full-year outlook, but warned that tariffs are starting to bite.
The shares fell 7.9 percent at 6:04 p.m. in extended trading in New York. The stock has climbed 42 percent this year through Thursday’s close.
“We have started feeling the impact of tariffs” in the third quarter, chief financial officer Harmit Singh said in an interview. Despite this, Levi’s profitability, as measured by gross margin, improved.
The company said that gross margin was bolstered by higher prices and a larger volume of sales through more profitable channels. Levi continues to expect tariffs of 30 percent in China, but increased its expectation to 20 percent for the rest of the world, up from the 10 percent it projected a quarter earlier.
Many US retailers have imported more inventory amid concerns about rising tariffs. So far, Levi already has 70 percent of product needed for US holiday shopping season.
The San Francisco-based company now sees revenue growing about 3 percent this year, up from its previous guidance of as much as 2 percent. Levi’s third-quarter earnings per share, excluding some items, was 34 cents, surpassing the average of estimates compiled by Bloomberg.
Under chief executive officer Michelle Gass, Levi has prioritised selling its jeans and apparel directly to shoppers through its own websites and network of stores, focused on selling products at full price. The company has also sought to capitalise on the rise in popularity of Western attire.
Revenue was $1.5 billion in the third quarter, in line with estimates, while sales in the Americas and Asia beat expectations. Beyond Yoga, Levi’s athleisure brand, also performed better than expected.
Laurent Vasilescu, managing director at BNP Paribas, attributed to stock decline to the high expectations placed on the company by investors who anticipated a higher outlook for adjusted annual earnings per share.
Levi sees adjusted earnings per share in a range of $1.27 to $1.32 this year, up 2 cents from the previous projection. The average analyst estimate for the measure is $1.31.
By Lily Meier
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