Levi Strauss & Co (LEVI) shares plummeted 5.25% in after-hours trading on Thursday, despite the company reporting better-than-expected third-quarter results and raising its full-year guidance. This surprising market reaction highlights the complex factors influencing investor sentiment.
The denim maker reported fiscal Q3 adjusted earnings of $0.34 per share, surpassing the analyst consensus estimate of $0.31. Net revenue for the quarter rose to $1.54 billion, beating expectations of $1.50 billion. Encouraged by strong demand for wide-leg denim bottoms in Europe and the Americas, Levi Strauss raised its full-year organic net revenue growth forecast to about 6%, up from its previous target of 4.5% to 5.5%.
Despite these positive developments, investors appeared to focus on potential headwinds. The company's outlook assumes U.S. tariffs will remain at 30% for China and 20% for other countries through year-end, which could pressure margins. Additionally, the stock's significant year-to-date gain of nearly 42% prior to the earnings release may have set high expectations, leading to profit-taking despite the strong results. The after-hours decline suggests that market participants are reassessing the stock's valuation in light of broader economic uncertainties and the challenging retail environment.
