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Takeaways
- Levi Strauss announced a first-quarter profit that exceeded estimates after the bell on Monday.
- Its Dockers business now is classified as "discontinued operations," as Levi's made the decision during the first quarter to pursue a sale of the brand after launching a review in October.
- Executives said new tariffs will have a "minimal impact" on Levi's second quarter, but it could face a larger headwind later in the year.
Levi Strauss, a luxury goods company, reported a better-than-expected profit for the first quarter and gave an optimistic outlook about the new tariffs imposed by Trump’s administration on Monday.
After the bell rang on Monday, Levi’s announced quarterly adjusted earnings per shares (EPS) of $.38, which was higher than the $0.28 consensus forecast by VisibleAlpha’s polled analysts. The company generated $1.53billion in revenue. This excludes $67m in sales from Dockers, which are now classified as “discontinued activities.”
Levi’s announced that it decided to sell the brand during the first quarter after launching an evaluation in October.
CEO Michelle Gass said in Monday's earnings call that the company plans to be "surgical" with any pricing changes forced by the new tariffs, according to a transcript from AlphaSense. Gass said customers have been buying more of Levi Strauss' premium products in recent quarters, giving the company more pricing power.
The shares initially rose on Tuesday, but have since reversed direction and are down by more than 6%.
Levi's Expects 'Minimal Impact' From Tariffs in Second Quarter
Levi's CFO Harmit Singh said on Monday's earnings call that the company expects "minimal impact" from tariffs on its second-quarter profit margins, as much of its inventory has already been imported. Singh said the tariffs could be a "significant challenge" later this year, but he and Gass said they are "fluid" and could change.
The company imports products from 20 countries into the U.S., and Gass said Levi's has created a "task force" to evaluate ways to minimize the potential impacts of tariffs.
In a note following the earnings, JPMorgan analysts upgraded Levi's stock to "overweight" from "neutral," while also trimming the stock's price target to $17 from $19. The analysts cut their price target because they believe tariffs will likely hurt profits this year, but said Levi's should be able to mitigate an estimated 75% of the cost because of changes to its business since tariffs played a role in the first Trump administration.
UPDATE and CLARIFICATION—This article has been updated with the latest share price and additional information about the revenue result.
