Levi Strauss prepares for uncertainty in 2025 even as demand ticks up

The news: Levi Strauss is taking a cautious approach to 2025 despite recording a strong holiday quarter on the back of healthy demand for its denim offerings.

• The retailer expects full-year revenues to fall 1% to 2% this year—well below market forecasts for 3.6% sales growth.
• It’s guiding for adjusted earnings of $1.20 to $1.25 per share, falling short of estimates for $1.37.

The headwinds: Levi’s conservative outlook is not the result of waning demand, CEO Michelle Gass told CNBC. Instead, it reflects the unpredictable retail environment as the lack of clarity surrounding tariffs makes it practically impossible for companies to plan ahead.

• Levi’s is preparing to navigate “a lot of uncertainty related to the macro environment, potential tariffs, changes in the tax code as well as worsening foreign exchange,” CFO Harmit Singh said on the company’s Q4 earnings call.
• A shorter fiscal year and Levi’s decision to shut down its lower-priced Denizen label and footwear business last year are also expected to weigh on sales and profits.

The tailwinds: Despite clear challenges, Levi’s is better-positioned than many retailers.

• Levi’s expanded denim offerings are resonating strongly with consumers, putting the company on track to achieving its goal of becoming a lifestyle apparel brand. Net revenues rose 12% YoY in Q4 to $1.84 billion, well ahead of estimates for $1.72 billion.
• Its campaign with Beyoncé is keeping the brand at the forefront of pop culture and helping to drive sales.
• Less than 1% of its inventory is sourced from China, while roughly 5% comes from Mexico, making it less exposed to the first batch of tariffs President Donald Trump has threatened to impose.

Our take: Levi’s is right to be cautious about the year ahead, given the enormous amount of uncertainty surrounding tariffs and their potential impact on consumer spending.

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