Levi Strauss Stock Dives After Earnings Beat. Here’s Why.

Levi Strauss stock took a hit after management took a conservative approach toward fiscal fourth-quarter guidance. (Justin Sullivan/Getty Images)

Key Points

• Levi Strauss exceeded third-quarter earnings and revenue estimates, reporting 34 cents per share on $1.54 billion.
• Shares dropped 10% to $22.05 after the company issued a cautious current-quarter outlook, citing tariffs and macro complexities.
• Gross margin is projected to contract by 100 basis points in the current quarter due to tariffs and the absence of a 53rd week.

Levi Strauss beat third-quarter earnings expectations and raised guidance for the full year, but shares fell after a prudent current-quarter outlook rattled investors’ confidence in the jeans maker.

Shares dropped 10% to $22.05 in early trading Friday following the earnings report, posted late Thursday.

Gross margin is expected to contract about 100 basis points in the current quarter, driven by tariffs, as well as the absence of the 53rd week, Chief Financial Officer Harmit Singh said.

“We just take a conservative approach to the [fourth] quarter, given the complex macros—there’s tariffs and maybe potential impacts on demand,” Singh said in a call with analysts Thursday.

For the fiscal third quarter, ended August, Levi reported adjusted earnings per share of 34 cents on revenue of $1.54 billion, beating FactSet estimates of 31 cents on $1.50 billion.

The company also nudged up its full-year fiscal 2025 guidance revenue and adjusted earnings per share. The outlook assumes U.S. tariffs on imports from China will remain at 30% and levies on imports from the rest of the world at 20% for the remainder of the year.

“While the macro environment remains complex, the consistency of our performance and operational agility gives me confidence that we will deliver sustained, profitable growth into 2026 and beyond,” said CEO Michelle Gass, noting the company is well positioned for the holiday season.

Analysts, so far, seemed unbothered by the soft current-quarter guidance. At least six analysts had hiked their price target on Levi stock by Friday morning, according to FactSet. The average target now stands at $26.15, with 67% of analysts covering the company rating it Buy or Buy-equivalent, with the rest rating it Hold.

Write to Elsa Ohlen at elsa.ohlen@barrons.com