Levi Strauss adjusted its financial outlook on Wednesday, providing mixed signals about its near-term prospects. The denim retailer increased its adjusted earnings per share guidance for the full fiscal year to a range of $1.54 to $1.56, up from the previous expectation of $1.46 to $1.52. However, the company simultaneously reduced its net revenue growth forecast to 7%, representing the lower end of its previously stated range of 7% to 7.5% growth. Stock performance following the announcement was muted, with shares trading roughly flat in extended hours after an initial modest gain.
The company’s third quarter results reflected strength in certain areas offset by weakness in others. Net revenues climbed approximately 4% to $1.61 billion from $1.54 billion in the comparable prior-year period. Operating margin expanded to 13.8% for the quarter from 10.8% year-over-year, with tariff refunds contributing 4.9 percentage points to both operating and gross margins. The Americas region posted a 4% revenue increase, though domestic U.S. sales declined 1%.
Tariff-related benefits significantly bolstered the bottom line, contributing 16 cents per share to earnings. Of this amount, 5 cents were redirected toward business initiatives, specifically marketing and promotional activities planned for the holiday selling season. Despite the accounting benefit, net income fell to $168.6 million, or 43 cents per share, from $218.1 million, or 55 cents per share, in the prior year.
Direct-to-consumer operations presented a challenge for the retailer. DTC net revenues increased 2% during the quarter, though comparable sales remained essentially flat. The channel represented 45% of total net revenue. Wholesale revenues performed better, rising 6% for the period. Chief Executive Michelle Gass acknowledged the underperformance in DTC operations, stating that management had identified specific issues and implemented corrective actions.
Looking ahead, the company also announced a leadership transition in its finance division, with John Vandemore scheduled to assume the chief financial officer role effective November 1, replacing Harmit Singh, who had announced his retirement earlier in the year.
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