What Happened?
Shares of denim clothing company Levi's (NYSE: LEVI) fell 13.2% in the afternoon session after President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%. From clothing brands and electronics makers to the e-commerce sites that move their goods, companies built on global supply chains took the biggest hit. Stocks with heavy exposure to Asia were especially hard-hit, as the new tariffs threatened the growth and profits of firms with factories in the region. Vietnam, central to many companies' production plans, faced a 46% tariff. Cambodia and Indonesia were also in the crosshairs, with tariff rates of 49% and 32%. These measures could significantly erode the competitiveness of goods produced in those regions. For example, reduced production volumes would negatively affect the sales growth of all companies benefiting from these manufacturing hubs.
The shares closed the day at $14.44, down 13.7% from previous close.
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What The Market Is Telling Us
Levi’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. Moves this big are rare for Levi's and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock gained 18.2% on the news that the company reported first-quarter results that blew past analysts' EPS expectations, driven by growth in its Direct-to-Consumer (DTC) sales in all business segments.
As a reminder, DTC revenue has higher margins than wholesale revenue because the company can charge higher prices. In addition, management noted that nearly half of its revenue (48%) was generated from its DTC business (direct-to-consumer), which means less reliance on partners to drive the top line and potentially more flexibility, which could extend to how its products are priced.
Furthermore, the company stated its revenue would have been flat year on year excluding its Russia business and divestiture of Denizen. Levi's also declared a dividend of $0.12 per share ($48 million total).
Lastly, the company's full-year revenue and EPS guidance were in line with Wall Street's projections. Overall, this was a favorable quarter for Levi's.
Levi's is down 17.1% since the beginning of the year, and at $14.44 per share, it is trading 40.3% below its 52-week high of $24.17 from June 2024. Investors who bought $1,000 worth of Levi’s shares 5 years ago would now be looking at an investment worth $1,518.
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