Levi Strauss on Wednesday revised its profit outlook upward, mainly due to tariff rebates, but gave a less optimistic earnings outlook after a lackluster sales quarter.
The denim retailer raised its full-year adjusted earnings per share forecast to $1.54 to $1.56 from a previous range of $1.46 to $1.52. Analysts had expected a range of $1.52 to $1.59, according to LSEG.
The company also lowered its full-year net revenue growth forecast to 7%, the lower end of the range of 7% to 7.5% growth it had previously provided. However, Levi said he expects organic revenue, excluding currency, to increase 6% for the year, which is at the high end of a traditional range.
Levi’s stock fell nearly 4% on Thursday.
The denim retailer announced a 1% decline in U.S. revenue for its fiscal third quarter, but a 4% increase in net revenue in the Americas. The company also reported an operating profit margin of 13.8% for the quarter (compared to 10.8% in the same period last year), which was due to tariff refunds contributing 4.9% to the operating profit margin and gross profit margin.
Levi’s also said the tariff refund added 16 cents to its earnings per share, of which 5 cents were “reallocated to support operations.” Chief Executive Officer Michelle Gass said on a call with analysts that money will be spent on marketing and promotions during the holiday season.
Here’s how Levi’s’ third-quarter results compare to Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: 37 cents adjusted, 36 cents expected; Revenue: $1.61 billion, $1.62 billion expected.
Levi’s reported net income of $168.6 million, or 43 cents per share, for the three months ended Aug. 30, down from $218.1 million, or 55 cents per share, in the year-ago period.
Sales increased approximately 4% to $1.61 billion from $1.54 billion the previous year.
Levi said direct-to-consumer net revenue increased 2% in the quarter, but comparable sales were about flat. According to the company, DTC accounted for 45% of total net revenue in the third quarter. Meanwhile, wholesale revenue increased 6% in the quarter.
“While we achieved strong performance across most of our businesses, DTC results for the quarter were lower than expected,” Gass said on a conference call with analysts. “We have a clear understanding of what worked and what didn’t and have already taken targeted steps to improve performance.”
The company previously said it was seeing broad-based growth across its business segments, including core Levi’s and premium BlueTabs.
Last month, the company announced that John Vandemoer would become chief financial officer, effective November 1, replacing Harmit Singh, who announced his retirement in April.
