Levi Strauss & Co (LEVI) shares plummeted 5.11% on Tuesday, despite the company reporting better-than-expected first-quarter results and maintaining its full-year outlook. The sharp decline comes as investors grapple with the potential impact of recently announced tariffs on the jeans maker's business.

In its earnings report released late Monday, Levi Strauss posted adjusted earnings per share of $0.38, significantly beating the analyst consensus of $0.28. The company's revenue of $1.53 billion was in line with expectations. CEO Michelle Gass emphasized the strength of the Levi's brand and noted that the company's transformation into a direct-to-consumer lifestyle retailer is accelerating both top and bottom-line growth.

However, the positive earnings news was overshadowed by concerns about the impact of new tariffs announced by President Trump last week. While Levi Strauss maintained its 2025 guidance, excluding any potential tariff effects, investors seemed wary of the uncertainty surrounding the issue. Gass stated that the company has assembled a task force to evaluate various scenarios and identify mitigation strategies, adding that any price increases would be "surgical" rather than across-the-board.

Several analysts lowered their price targets for Levi Strauss in response to the tariff concerns. Barclays cut its target to $18 from $22, while Stifel reduced its target to $20 from $25. These adjustments reflect growing anxiety about the potential impact on the company's margins and overall profitability.

The sell-off in Levi Strauss stock appears to be part of a broader market reaction to the escalating trade tensions. As investors digest the implications of the new tariffs on various industries, companies with significant exposure to international supply chains and markets are facing increased scrutiny. Despite management's assurances, the market seems to be pricing in the risk of potential disruptions to Levi's business model and profit margins in the coming quarters.