Levi Strauss & Co. (LEVI) Earnings & Analysis

Latest quarter

Levi Strauss reported Q3 FY2026 revenue of $1.6 billion, up from $1.5 billion a year earlier. Revenue was −0.30% against the consensus, a miss despite both figures rounding to $1.6 billion. Adjusted earnings per share beat the consensus, at $0.48 against $0.36.

The filing attributed revenue growth to wholesale and direct-to-consumer sales in Asia. It said wholesale benefited from price increases and higher volumes, while direct-to-consumer growth reflected e-commerce and store expansion, partly offset by softer store traffic.

Gross margin rose to 66.2% from 61.7%, and operating margin increased to 13.8% from 10.8%. The filing said a $78.6 million tariff refund benefit contributed to the margin increase, alongside lower product costs.

Levi Strauss reported diluted earnings per share of $0.43, down from $0.55; the filing shows that the prior-year figure included income from discontinued operations. Free cash flow was $44.3 million, compared with −$39.3 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Michelle Gass said direct-to-consumer performance fell short of expectations as traffic softened in the U.S. and Europe. She attributed the European slowdown partly to unseasonably warm weather and said traffic and sales improved as temperatures normalized. In the U.S., she said the back-to-school campaign did not generate the traffic and demand the company had anticipated.

Asked about the U.S. business, Gass said the campaign had focused on loose fits while consumer interest had shifted toward low-rise styles. She said Levi Strauss responded by reshooting the campaign, remerchandising stores and seeking more inventory. Gass added that U.S. direct-to-consumer trends had returned to positive growth early in Q4.

Gass told analysts that competition in denim had intensified and that the company was putting tariff refund money into demand generation and marketing. CFO Harmit Singh said Levi Strauss had raised prices rather than cutting them, but would use promotions during holiday events to remain competitive.

On margins, Singh said the tariff refund benefit, net of reinvestment, contributed 370 basis points to Q3 gross margin. He said the remaining expansion reflected lower product costs, partly offset by foreign exchange. Singh also said distribution costs exceeded expectations as a network transition took longer than anticipated and a fire disrupted operations.

Asked about the transition, Gass said Levi Strauss had closed its parallel Hebron facility at the end of Q3 and expected to begin seeing benefits in 2027. She said the company was investing with its partner to improve fulfillment at Groveport. Singh said Levi Strauss planned to reinvest roughly three-quarters of the tariff benefit in marketing, supply chain capabilities and holiday value.

On wholesale, Singh told analysts that Q4 year-over-year growth would be lower than in Q3 because of shipment timing, not weakening demand. He said he could not be more specific about the following year because the financial plan had not been completed.

Guidance

For FY2026, Levi Strauss now expects reported revenue growth of approximately 7%, compared with its previous 7% to 7.5% outlook; Singh attributed the change to a stronger U.S. dollar. He said organic growth of approximately 6% would be at the high end of the prior range.

Levi Strauss raised its adjusted EPS range to $1.54 to $1.56 from $1.46 to $1.52 and its adjusted EBIT margin outlook to approximately 12.1% from 12%. Singh said the company now expects adjusted SG&A at approximately 51% of revenue, versus 49.7% to 49.9% previously.