Levi Strauss Faces Margin Strains Amid Trade Policy Challenges

Levi Strauss & Co shares experienced a 7% decline in premarket trading on Friday. Investors were particularly concerned about the denim manufacturer's warning regarding a potential tariff-induced impact on its fourth-quarter margins, even as the company raised its annual profit forecast.

The company's warning underscores the effects of the Trump administration's trade policies, especially on consumer-centric companies sourcing from regions without U.S. trade agreements. Despite leveraging the trend towards baggy, loose-fit styles popular among Gen Z, Levi's anticipates a 130-basis-point dent in its gross margins for the fourth quarter.

Levi's sources most of its products from South Asian countries, including Bangladesh, Cambodia, and Pakistan, which currently suffer high tariffs. While analysts described the forecast as cautious, some noted the lack of adverse changes in consumer behavior recently. Despite competitive pressures, Levi's has secured holiday inventory and adjusted prices to counteract tariff effects, helping its stock value rise by 40% this year.

(With inputs from agencies.)