Levi Strauss raised its profit forecast for the fiscal year on Wednesday, citing tariff refunds, while narrowing its revenue growth target to the low end of its earlier range, according to CNBC.
The denim maker now expects adjusted earnings per share of $1.54 to $1.56 for the full year, up from a prior range of $1.46 to $1.52. Analysts surveyed by LSEG had projected $1.52 to $1.59, CNBC reported.
At the same time, Levi lowered its full-year net revenue growth guidance to 7%, the bottom of its previous 7% to 7.5% range.
Why it matters
The split guidance — higher profit, softer sales — reflects how one-time tariff refunds can flatter a retailer's bottom line even as demand cools. For Levi, the refunds added nearly five percentage points to its operating margin in the third quarter, a boost that will not repeat on the same scale. The company's ability to grow revenue without that tailwind is now the central question for investors.
The results also put a spotlight on Levi's direct-to-consumer business, which CEO Michelle Gass acknowledged fell short of internal expectations. DTC has been a strategic priority for the company as it seeks higher margins and closer customer relationships, so a soft quarter there carries weight beyond the headline numbers.
Third-quarter results
For the three months ending Aug. 30, Levi reported net income of $168.6 million, or 43 cents per share, down from $218.1 million, or 55 cents per share, in the same period a year earlier, according to CNBC.
Operating margin came in at 13.8%, compared with 10.8% a year prior. Tariff refunds contributed 4.9% to both operating margin and gross margin, the company said.
Levi said the refunds added 16 cents to earnings per share, of which 5 cents was "redeployed to support the business." The company did not say how that money was used, CNBC reported.
In the Americas, net revenues rose 4% for the quarter, though U.S. revenue slipped 1%.
Direct-to-consumer net revenues grew 2%, with comparable sales roughly flat. DTC accounted for 45% of total net revenue in the quarter. Wholesale revenues, by contrast, rose 6%.
What Gass said
Gass said the DTC shortfall prompted a quick response and pointed to improving trends as the holiday season approaches, including in the U.S.
"While our direct-to-consumer business fell short of our internal expectations, we moved quickly to address the shortfall and are encouraged by the strength we are seeing heading into the holiday season, including in the U.S.," Gass said in a statement. "Based on the acceleration in recent trends, our DTC business is on track to deliver mid-single-digit growth in the fourth quarter."
The company has previously said it was seeing broad-based growth across segments, including its core Levi's brand and its premium blue tab line.
What to watch
Levi's fourth-quarter DTC performance will be the key test of whether the recent acceleration Gass described holds through the holiday period, and whether the company can hit its narrowed revenue target without relying on further tariff refunds.
