Dive Brief:
- Levi Strauss & Co. recorded roughly $80 million in tariff refunds last quarter and plans to spend three-quarters of the returned funds on supply chain improvements and other areas of the business, Harmit Singh, EVP and chief financial and growth officer, said on an Oct. 7 earnings call.
- A third of the $60 million will go to distribution and logistics, with the rest split equally between marketing and promotional activities, Singh said. A small portion went toward inventory clearance ahead of the holiday, with most supply chain spending occurring in the current quarter.
- “We believe this balanced approach strengthens our competitive position, supports near-term growth and keeps us on track to deliver our annual algorithm of mid-single-digit revenue growth with a clear path to 15% operating margins over time,” Singh said.
Dive Insight:
Levi’s is one of several consumer goods companies that recently reported receiving millions of dollars in tariff refunds after the Supreme Court nullified President Donald Trump's country-specific duties in February. Other recipients include McCormick & Co. and Kimberly-Clark, which plan to use the windfall to help offset higher input costs, while E.l.f Beauty has targeted the funds toward cutting prices and lifting sales volumes.
Levi’s invested roughly $25 million of the returned funds in Q3 ended Aug. 30, with $35 million on tap for the current quarter, Singh said. A portion of the Q4 spending — $3 million — will reduce gross margin by 10 basis points, bringing Levi’s projected gross margin to 61.8% for the quarter.
For the full fiscal year ending Nov. 29, the tariff recovery, net of related reinvestment costs, is expected to contribute about 80 basis points to Levi’s projected gross margin of roughly 63%, Singh said.
