Levi Strauss & Co. Q2 Earnings Call Highlights

Key Points

• Levi Strauss beat Q2 expectations and raised its full-year outlook for the second straight quarter, with organic revenue up 6% and adjusted EPS of $0.28, up 27% year over year. Management said it is “passing the entire Q2 beat” into guidance.
• Direct-to-consumer growth continued to drive results, with DTC revenue up 8% and comparable sales up 6% for the 17th consecutive quarter of comp growth. Strength was broad-based, led by Asia, the U.S., and women’s products.
• Margins improved despite tariff and currency pressure, as gross margin rose to 62.7% and adjusted EBIT margin expanded to 9%. The company also lifted its dividend and reported strong cash flow and lower inventory.

Levi Strauss & Co. NYSE: LEVI reported stronger-than-expected fiscal second-quarter results and raised its full-year outlook, citing broad-based growth across channels, geographies, genders and product categories.

President and CEO Michelle Gass said the quarter showed that the company’s strategy to become a “DTC-first lifestyle company” is gaining traction. On an organic basis, net revenue rose 6% in the quarter, with direct-to-consumer revenue up 8% and comparable sales up 6%. Gass said the quarter marked the company’s 17th consecutive quarter of comparable sales growth.

“Quarter after quarter, our results demonstrate that our strategies are working and momentum is building,” Gass said.

Revenue Growth Led by DTC, Asia and Women’s

The company said international markets continued to show momentum, with Asia revenue up 12% and the U.S. up 6%. Global wholesale increased 3%, led by strength in the U.S. wholesale channel.

Women’s remained a standout category, with revenue up 11% in the quarter. Gass said Levi’s gained market share in both men’s and women’s bottoms, supported by brand strength, marketing and product innovation.

Gass said the company’s push beyond denim bottoms contributed roughly one-third of top-line growth in the quarter. Bottoms revenue increased 6%, while tops were up 5%, or 7% excluding the impact of last year’s European distribution center transition. Shorts rose 11%, and white denim in women’s grew 70%.

The company highlighted continued demand for looser silhouettes, including the 501 ’90s for women and 501 Loose for men, while noting that core fits such as skinny, slim, boot cut and straight still make up the majority of the bottoms business.

Margins Improve Despite Tariff and Currency Pressure

Chief Financial and Growth Officer Harmit Singh said reported net revenue increased 8%, while organic revenue rose 6%, despite a two-point drag tied to last year’s European distribution center transition. Gross margin expanded 10 basis points to 62.7%, helped by lower product costs and pricing actions, while tariffs and foreign exchange were headwinds.

Adjusted SG&A increased 6.5%, primarily due to higher selling expenses and unfavorable foreign exchange, but leveraged 80 basis points as a percentage of revenue. Adjusted EBIT margin expanded 70 basis points to 9%, while adjusted EBIT dollars grew 18%. Adjusted diluted earnings per share were $0.28, up 27% from a year earlier and ahead of guidance.

Inventory ended the quarter down 7%, and adjusted free cash flow increased nearly 60% year over year to $231 million. Singh said the company is increasing its third-quarter dividend by $0.02 to $0.16 per share.

Full-Year Outlook Raised for Second Consecutive Quarter

Levi Strauss raised its fiscal 2026 outlook, with Singh saying the company is “passing the entire Q2 beat” into full-year guidance. The company now expects reported net revenue to increase 7% to 7.5% and organic net revenue to rise 5.5% to 6%.

The company raised its adjusted diluted EPS outlook to a range of approximately $1.46 to $1.52, up from its prior range of $1.42 to $1.48. Gross margin is expected to expand approximately 10 basis points for the full year, while adjusted EBIT margin is expected to be 12%.

The guidance assumes incremental U.S. tariffs of 30% on imports from China and 20% on imports from the rest of the world. Singh said the guidance does not include any potential benefit from tariff refunds, which total approximately $80 million paid to date.

For the third quarter, the company expects reported and organic net revenue to increase 4% to 5%, with adjusted diluted EPS of approximately $0.34 to $0.36.

Regional Performance and Infrastructure Updates

By segment, the Americas delivered 7% growth, with the U.S. up 5% on momentum in both DTC and wholesale. Europe declined 1% in the quarter due to last year’s distribution center transition, but first-half revenue grew mid-single digits. Singh said Europe’s DTC business grew 7%, and the company is encouraged by high single-digit wholesale pre-order growth for the second half.

Asia revenue increased 12%, with double-digit growth in both DTC and wholesale. Singh said performance was strong across markets, and Gass noted progress in China under new leadership.

The company also provided updates on operational initiatives. Singh said Levi Strauss completed the remap of Europe to an omnichannel distribution network, consolidating e-commerce fulfillment into distribution centers in Germany and the U.K. In the U.S., the company remains on track to transition its Hebron distribution center to Maersk by the beginning of the fourth quarter.

Levi Strauss also migrated Asia and Beyond Yoga onto its new global ERP platform, following North America. Europe and the remaining Latin American countries are expected to move to the platform by mid-2027. Singh said the ERP system is intended to unlock better data access, faster decision-making and the ability to scale AI and automation.

Management Cites Brand Momentum and Consumer Resilience

During the call, Gass emphasized marketing initiatives including the company’s “Behind Every Original” campaign and collaborations tied to music, sports and fashion. She also discussed the company’s soccer-related product collaborations and a viral marketing moment involving Levi’s Stadium, which she said generated approximately 1 billion press impressions.

Beyond Yoga revenue rose 16%, led by e-commerce. Gass said the brand is expanding beyond traditional activewear into lifestyle categories such as casual pants, travelwear, linen, tops, sweaters and dresses. She said the company has fewer than 20 Beyond Yoga stores and is still learning from that format.

In response to analyst questions, management said the consumer remains resilient across value, core and premium price points. Signature, the company’s value-focused brand, grew at a low single-digit rate in the quarter and 9% in the first half. Gass said the company expects Signature to accelerate in the second half.

Singh said two-thirds of second-quarter revenue growth came from units and one-third from average unit retail, with the company expecting a more balanced contribution for the full year. He cited full-price selling, DTC growth, premium offerings such as Blue Tab and women’s category expansion as factors supporting average unit retail growth.

Gass said the company remains optimistic about the denim category and its broader move into head-to-toe denim lifestyle offerings. “We have more ways to win than we’ve ever had,” she said.

About Levi Strauss & Co. NYSE: LEVI

Levi Strauss & Co is a global apparel company best known for its denim jeans and casual wear. Founded in 1853 in San Francisco by Bavarian immigrant Levi Strauss, the company pioneered the modern blue jean with the introduction of rivet-reinforced work pants. Over its more than 160-year history, Levi Strauss has evolved into a lifestyle brand, offering a broad portfolio that includes denim for men, women and children, as well as tops, outerwear, footwear and accessories.

The company's flagship label, Levi's®, is recognized worldwide for its iconic styles such as the 501® Original Fit Jeans, while additional brands, including Dockers®, Target core metric, and Denizen® by Levi's, cater to diverse price points and consumer segments.

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