Levi Strauss beat Wall Street’s quarterly expectations on the top and bottom lines on Wednesday, leading the retailer to increase its guidance and its dividend. 

The denim maker is now expecting full-year adjusted earnings per share to be between $1.46 and $1.52, up from a prior range of between $1.42 and $1.48. At the high end, that’s ahead of expectations of $1.50 per share, according to LSEG. 

Levi also raised its top-line outlook and is now expecting full-year sales to rise between 7% and 7.5%, compared with a prior range of between 5.5% and 6.5%. That’s ahead of expectations of 6.6%, according to LSEG. About half of that growth is expected to come from higher prices and the other half is expected to come from unit sales, said finance chief Harmit Singh. 

Here’s how Levi did in its second fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 28 cents adjusted vs. 24 cents expected
• Revenue: $1.56 billion vs. $1.52 billion expected

Despite the results, Levi’s shares dropped more than 5% in extended trading.

The company’s reported net income for the three-month period that ended May 31 was $87.3 million, or 22 cents per share, compared with $67 million, or 17 cents per share, a year earlier. 

Sales rose to $1.56 billion, up about 8% from $1.45 billion a year earlier.

In an interview with CNBC, CEO Michelle Gass said the company’s core consumer is proving to be resilient — even in the face of higher gas prices. She said about two-thirds of the quarter’s sales growth came from units — not just higher prices — giving the company the confidence to raise guidance and its dividend.

“Our demand remains healthy,” Gass said. “We’re seeing strength across our key segments of consumers, so we have our core Levi’s, but we’re also seeing strength in signature, as well as our new premium blue tab.” 

Levi Strauss saw another quarter of strong sales, helped in part by higher prices, and direct-to-consumer sales made up more than half of its overall revenue — a milestone for a company that has long relied on wholesalers.

The denim maker’s revenue grew by 14% while DTC sales through Levi’s own stores and website jumped 16%, bringing total DTC sales to 52% of overall revenue.

In an interview with CNBC, CEO Michelle Gass said she expects DTC revenue to make up more than half of overall sales for the duration of the year, even as its more traditional wholesale channel continues to grow.

The growth is not from increased sales volume alone: Levi is benefiting from higher prices and positive foreign exchange headwinds. Finance chief Harmit Singh, who announced plans to retire on Tuesday, said about half of Levi’s growth is related to recent price increases and half is tied to actual units sold.

Given its first-quarter beat, Levi raised its guidance. It’s now expecting full-year adjusted earnings per share to be between $1.42 and $1.48, shy of expectations of $1.47 per share on the low end, according to LSEG.

It’s expecting sales to rise between 5.5% and 6.5%, largely ahead of estimates of 5.6%, according to LSEG. 

Here’s how the apparel maker did in its first fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 42 cents adjusted vs. 37 cents expected 
• Revenue: $1.74 billion vs. $1.65 billion expected 

The company’s reported net income for the three-month period that ended March 1 was $175.8 million, or 45 cents per share, compared with $135 million, or 34 cents per share, a year earlier. 

Sales rose to $1.74 billion, up about 14% from $1.53 billion a year earlier. 

Levi’s DTC-first strategy comes with bigger margins but also higher costs in the short term as it changes its distribution system, which has weighed on earnings. However, Singh said its sales are becoming more profitable as DTC scales.

He also noted that Levi’s guidance could rise later in the year. Currently, it’s assuming a 20% global tariff, though President Donald Trump has for now set a 10% duty on U.S. imports after the Supreme Court rolled back so-called reciprocal tariffs earlier this year. If that 10% tariff remains in effect, it could boost full-year earnings by $35 million, or 7 cents per share. The company could also be refunded as much as $80 million after the Supreme Court struck down Trump’s previous global tariff policy, Singh said.

While that could boost earnings, Levi could face weaker sales in the coming months as consumers digest higher gas prices and consider pulling back on nice-to-haves like new clothes. Gass told CNBC she has not seen a pullback in spending so far, and the business is segmented in a way that it’s reaching a wide array of consumer demographics.

For example, Levi’s value brand Signature saw sales rise 16% during the quarter and its middle market Red Cap was up 9%, while its…

Levi Strauss CEO Michelle Gass was out for a run in San Francisco last March when she first heard the song “Levii’s Jeans” from Beyonce’s latest album, “Cowboy Carter.”

“Literally, I got chills,” Gass recounted to CNBC, adding the name check represented a “once in a lifetime” marketing opportunity she couldn’t afford to squander. “She is one of the most celebrated and influential artists of our time … We asked the question, ‘Could there be something more?'” 

Six months later, Levi announced Beyonce would star in a new global marketing campaign. Then, a pattern that’s repeated itself since Levi invented blue jeans more than 150 years ago happened again: competitors raced to catch up.

Gap and American Eagle launched their own star-studded campaigns the following summer in a bid to sell more jeans. Gap partnered with girl group Katseye in its viral made-for-TikTok “Milkshake” ad, while American Eagle chose actress Sydney Sweeney for its controversial “good jeans” campaign. Just before Thanksgiving, American Eagle launched another celebrity campaign with a different type of star: Martha Stewart.

Some smaller brands that can’t pay for a name like Beyonce have gotten free marketing just from celebrities wearing their denim. In late August, Kylie Jenner posted a picture of herself in True Religion jeans, leading to a spike in sales, CEO Michael Buckley told CNBC. He called it the “ultimate compliment.” 

Industry wide, brands aired nearly 70% more denim TV spots this year compared to last, as the global jeans market swelled to $101 billion, up 28% since 2020, according to data from TV outcomes company EDO and market research company Euromonitor International. 

Behind the big campaigns were hints about each retailer’s strategies and challenges. American Eagle is trying to win over more men. Levi’s wants to court more women. Gap is working to find relevance among a new generation of shoppers. 

But taken together, the marketing shows the lengths companies are going to dominate a growing denim category that is still up for grabs — even if Levi may have created it. In an economy where many shoppers are thinking twice before shelling out for a new pair of jeans, retailers are scrapping harder than ever to win every dollar they can. 

“There definitely is a denim war. There’s a war for people’s attention. There’s a war for people’s spend,” said Neil Saunders, retail analyst and GlobalData managing director. “Who has the most comfortable denim? Who has the softest feel? Who has the best cuts? What fits me well? There’s much more consideration in the customer buying process than for some other products, so it does make it much more of a battle between the retailers.” 

Like all things in fashion, denim goes through cycles. It’s a stalwart garment in any closet, but sometimes it’s in fashion, and sometimes it’s not. 

The last time denim was this big was during the 2000s when brands like True Religion and Joe’s Jeans…