Levi Strauss‘s profits are growing more than Wall Street expected despite higher costs from tariffs, thanks to targeted price increases and a shift away from wholesalers, the company said Thursday as it reported fiscal third quarter results.
During the quarter, Levi’s gross margin grew 1.1 percentage points to 61.7%, up from 60.6% in the year-ago period and better than the 60.7% analysts had expected, according to StreetAccount.
In an interview with CNBC, CEO Michelle Gass said the company has started to raise the price of some of its jeans and clothes and will hike more prices in the U.S. and other markets next year.
“As we’ve been taking these targeted actions, we’ve not seen an impact to demand. We’ll of course, stay very, very close to that but … we’re taking a surgical, thoughtful approach on any pricing,” said Gass. “We know that we’re a brand that is known for great quality and value. We don’t take that for granted. We know we have to earn that every day.”
Finance chief Harmit Singh added demand is “really strong” and most of the company’s revenue growth is not coming from price increases.
Price hikes are helping Levi’s margins, but the company is also discounting less and selling more through its own website and stores instead of wholesalers, which comes at a higher margin.
The denim maker said its strong results led it to raise its full-year outlook, but added it’s still taking a “prudent” and “conservative” look at the rest of the year as it navigates ongoing macroeconomic volatility, Singh said.
Here’s how Levi’s performed during the quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
- Earnings per share: 34 cents adjusted vs. 31 cents expected
- Revenue: $1.54 billion vs. $1.50 billion expected
Though Levi’s posted better-than-expected results, shares dropped more than 6% in extended trading. Its stock had climbed about 42% this year through Thursday’s close.
The company’s reported net income for the three-month period that ended Aug. 31 was $218 million, or 55 cents per share, compared with $20.7 million, or 5 cents per share, a year earlier. Excluding one-time items related to impairment and restructuring charges, among other expenses, Levi posted adjusted earnings of 34 cents per share.
Sales rose to $1.54 billion, up 7% from $1.44 billion a year earlier.
Levi’s is now expecting its full year sales to rise 3%, up from its prior guidance of between 1% and 2% growth, far exceeding expectations of a 2.9% decline, according to LSEG.
It’s expecting its full year adjusted earnings per share to be between $1.27 and $1.32, up from a prior range of between $1.25 and $1.30. At the high end, the outlook is in line with Wall Street estimates of $1.31 per share, according to LSEG.
The jeans company said it’s expecting its operating margin to be between 11.4% and 11.6%, which is also in line with expectations of 11.6%, according to StreetAccount. It’s now expecting its gross margin to rise by 1…
Read More: Levi Strauss (LEVI) Q3 2025 earnings
