The company now sees revenue rising between 1% and 2% for the current fiscal year – above the average analyst estimate and up from a previous view that sales would decline 1% to 2%.
Levi also slightly lowered its guidance for gross margin due to tariffs, which the company factored in as 30% for products imported from China and 10% for the rest of the world.
The shares jumped 7.1% in premarket trading today. The stock has advanced 14% so far this year.
The results suggest that Levi’s efforts to branch into new products and categories – part of what the company calls the “head-to-toe denim lifestyle” – is paying off.
Led by CEO Michelle Gass, Levi has sought to expand its offerings, which include caps and aprons.
It’s collaborating with Nike Inc to sell denim Air Max 95 sneakers, and looking to boost sales through its own stores and website.
In a call with analysts yesterday afternoon, Harmit Singh, chief financial and growth officer, attributed the company’s strong performance to its “laser focus” on the core Levi’s brand and its burgeoning direct-to-consumer strategy.
“Our e-commerce business is now a profitable business,” he said, adding that “It used to be a drag”.
Jeans remain at the top of the company’s best sellers, but it’s making progress selling polo shirts and T-shirts for men, and jackets, dresses and tank tops for women.
The company said it has seen a higher sell-through of its full-priced products.
The impact of tariffs on profitability, excluding mitigation efforts, is expected to be US$25 million to US$30 million through the end of the year, Singh told Bloomberg News in an interview.
Revenue for the quarter ended June 1 rose 6% to US$1.4 billion, beating the average estimate of analysts.
On an annual basis, sales grew for a fifth straight quarter, while Wall Street had expected a decline.
“More than half of Levi’s US merchandise needs for the rest of the year have already been imported into the country,” Singh said.
The company has tried to mitigate the effect of tariffs by making “targeted” pricing changes, diversifying its supply chain and negotiating with vendors.
Earlier this year, Levi was one of the first big apparel companies to report earnings after Trump announced sweeping tariffs on April 2.
The company’s previous guidance didn’t factor in tariffs, but since then, a number of competitors have flagged their expected effects along with general consumer caution.
American Eagle Outfitters Inc pulled its guidance altogether, citing discounting and excess inventory among other issues.
Shares of Gap Inc plunged in late May after the company projected a tariff hit of as much as US$300 million.