Levi Strauss & Co. (NYSE:LEVI) boosted its full-year revenue and earnings forecast after reporting solid third-quarter results, driven by strong demand for its denim products and continued momentum in its direct-to-consumer segment.
Despite the upbeat guidance, Levi’s shares dropped 6.7% in pre-market trading on Friday, with Morgan Stanley analysts noting the upgrade “came with disappointing profitability flow-thru, in our view.”
For the third quarter, Levi posted earnings of $0.34 per share, topping the $0.30 consensus estimate. Revenue climbed to $1.54 billion from $1.50 billion a year ago, also exceeding expectations of $1.5 billion.
The company now expects fiscal 2025 adjusted earnings between $1.27 and $1.32 per share, slightly higher than its previous forecast of $1.25 to $1.30. It also raised its projected net revenue growth to roughly 3%, up from 1%–2%, and organic growth to around 6%, compared to the earlier 4.5%–5.5%.
However, the stock slipped in after-hours trading as some investors were unimpressed with the profitability outlook. Analysts at Vital Knowledge commented that although Levi “continues to execute very well in a tough macro environment,” expectations were “fairly high” heading into earnings, “which might explain some of the knee-jerk disappointment.”
Levi anticipates its gross margin will expand by 100 basis points this year, above its earlier 80-basis-point projection, while adjusted EBIT margin is expected to remain in the 11.4%–11.6% range.
Chief Executive Michelle Gass said Levi’s strategy of becoming a “DTC-first, head-to-toe denim lifestyle retailer” is driving a “meaningful inflection” in performance and positioning the company strongly for the holiday season despite a “complex” macroeconomic environment.
The company highlighted broad-based strength across channels and product categories, citing increasing full-price sales in its own stores and growing traction among younger consumers.
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