Levi shares rise as pricey denim sales smooth over tariff hit

A Levi's banner adorns the facade of the New York Stock Exchange. (AP Photo/Richard Drew)

Levi Strauss’ shares shares jumped about 10 per cent on Wednesday as investors cheered its strongest quarterly revenue growth in nearly four years, with confidence growing in the denim maker’s ability to stave off tariff hits with more full-price sales.

Demand for Levi’s baggy jeans product line, as well as increased sales to younger customers through its digital channels, has given the company room to raise some prices and pare back on discounts against the backdrop of a roughly 10 per cent tariff the company is paying under the duties introduced on imports into the U.S. in 2025.

“Demand hasn’t been affected (by) higher pricing, and we see benefits becoming more fully realized starting in F2Q,” Rick Patel, analyst at Raymond James, said in a note.

The company is also bracing for a C-suite change, and said it was looking for a replacement for finance chief Harmit Singh, who will retire after about 13 years in the role.

“While the announcement of the retirement of long-time CFO Harmit Singh was somewhat unexpected, we believe investors will be pleased that he will remain in his role through the search and transition period to ensure continuity,” Telsey Advisory Group analyst Dana Telsey said in a note.

Levi’s shares have risen for the last three years. Its forward price-to-earnings ratio for the next 12 months, a common benchmark for valuing stocks, is 12.91, compared with 19.23 for Ralph Lauren and 9.68 for American Eagle.

Wall Street’s main indexes opened higher on Wednesday after the U.S. and Iran agreed to a two-week ceasefire, raising expectations that energy supplies through the Strait of Hormuz could resume.

Shares of other apparel and footwear makers including Abercrombie & Fitch, Nike and Ralph Lauren were up about two per cent to six per cent.

Still, the company’s forecast raise, particularly around its expectations for growth in the U.S., was conservative, analysts noted, implying that demand in the region could soften even though the conflict in the Middle East and the resultant higher fuel prices have not yet hurt Levi’s sales.

Over the last year, wealthier Gen Z and Millennial shoppers in the U.S. have continued to purchase popular nice-to-have items such as clothing and accessories, as well as skincare and fragrances, giving way to a K-shaped or barbell economy, as lower-income households curb spending due to higher living costs.

“We like Levi’s premium denim share leadership, focus on working capital discipline and unified product lines, and continued product and lifestyle innovation,” said TD Cowen analyst Oliver Chen.

(Reporting by Juveria Tabassum in Bengaluru; Editing by Maju Samuel)