By Sanskriti Shekhar and Danielle Kaye
July 8 (Reuters) – Levi Strauss on Wednesday raised its annual net sales forecast, betting on sustained demand for jeans and casual apparel even as economic uncertainty weighs on broader consumer spending.
Shares of the company fell around 5% in extended trading despite the improved outlook. They had climbed 17.5% so far this year.
The San Francisco company, which beat Wall Street estimates for second-quarter sales, has benefited from strong sales of its denim and dressier casual apparel like baggy and loose-fitting styles, particularly among Gen Z shoppers.
Levi’s has expanded beyond denim into dresses, skirts and tops, while investing heavily in its higher-margin direct-to-consumer business, moves that the brand says have helped rebuild momentum. It has reported revenue increases each quarter for the past two years.
Levi’s has been pushing to grow its appeal among higher-income shoppers. It is selling its new line of $300 jeans in more stores this year as it looks to boost growth by tapping into strong demand for premium denim, finance chief Harmit Singh told Reuters last fall.
But the brand’s direct business continues to skew toward middle- and lower-income consumers, according to Michael Gunther, SVP of Research and Market Intelligence at Consumer Edge, which tracks U.S. card spending at Levi’s owned stores and online channels.
Levi’s pricing and basket trends have remained largely in line with the broader industry this year, which Gunther said was “notable given the company’s continued emphasis on premiumization.”
In Levi’s largest market, the Americas, sales rose 9% in the quarter. Asia posted a 10% increase, while sales in Europe slowed dramatically from the first quarter and a year earlier, rising 4%.
The jeans maker’s net revenue rose 8% to $1.56 billion in the quarter ended May 31, exceeding analysts’ estimates of $1.52 billion. Adjusted earnings of 28 cents per share topped estimates of 24 cents.
It now expects fiscal 2026 net revenue to grow in the range of 7.0% to 7.5%, compared with its prior forecast of a 5.5% to 6.5% rise. Analysts on average expect a 6.6% rise to $6.70 billion, according to data compiled by LSEG.
Levi’s also raised its adjusted earnings per share in the range of $1.46 to $1.52, compared with its prior forecast between $1.42 to $1.48.
CEO Michelle Gass in a statement said the continued sales growth was “another proof point that our strategies are working and our team is executing.”
“Our evolution into a DTC-first, denim lifestyle company – with a much larger addressable market – is translating to faster growth and higher profitability,” Gass added.
WORLD CUP CAMPAIGN
The iconic San Francisco denim brand, founded in 1853, returned to the public market in 2019 after more than three decades as a private company. Its successful turnaround strategy has included leaning into marketing efforts, including its high-profile partnerships.
The company recently drew attention with a marketing campaign tied to FIFA’s temporary removal of branding at Levi’s Stadium during World Cup preparations into a global campaign that generated millions of social-media views, underscoring management’s efforts to keep the 173-year-old brand culturally relevant among younger consumers.
Levi’s has also been diversifying its sourcing base away from China, Bangladesh and Cambodia to help offset tariff pressures, which, along with foreign exchange, weighed on margins.
The company said its annual forecast assumes tariffs remain at 30% for China and 20% for the rest of the world.
Retailers more broadly have flagged cautious consumer spending and uneven demand, especially for apparel and other non-essential goods.
Gap and American Eagle Outfitters in May pointed to weakness in parts of their women’s apparel businesses, with softer demand for dresses and bottoms weighing on sales growth.
(Reporting by Sanskriti Shekhar in Bengaluru and Danielle Kaye in New York; Editing by Tasim Zahid)
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