(Reuters) -Levi Strauss shares surged more than 7% in premarket trading on Friday after the denim maker raised its annual revenue and profit forecasts, counting on robust demand at its stores and website to offset a margin hit from U.S. tariffs.
The company has been investing in its direct-to-consumer-first strategy and focusing on its core denim lifestyle products, which drove second-quarter sales and profit beat.
Levi’s results beat was “impressive”, said Dana Telsey, analyst at Telsey Advisory Group. The raised forecast was also encouraging as it now includes an estimated impact from 30% tariffs on China and 10% duties on other countries, Telsey added.
The denim maker said it would counter President Donald Trump’s tariffs on imports into the U.S. by diversifying its supply chain to further reduce dependence on China and source from countries such as Bangladesh and Cambodia.
To be sure, the updated forecast does not account for Trump’s proposed 36% tariff rate on Cambodia and a 35% levy on U.S. imports from Bangladesh, which are set to go into effect on August 1.
About 60% of Levi’s revenue came from outside of the U.S., which grew 10% in the second quarter, led by Europe. Revenue from the U.S. grew 7%.
The company’s focus on denim dresses and skirts and growth in its women’s apparel and Beyond Yoga brand have led to increased purchases from younger customers, said J.P.Morgan analyst Matthew Boss in a note.
Levi’s stock trades at 14.92 times analysts’ estimates for the company’s earnings for the next 12 months, compared with 20.32 for Ralph Lauren and 8.46 for Abercrombie & Fitch, according to LSEG data.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Leroy Leo)
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