Levi Strauss & Co. Touts 9% Organic Growth, DTC Strength and Margin Upside at JPMorgan Chat

Key Points

• Levi delivered 9% organic growth (14% reported) as DTC now comprises half the business, with DTC up 10%, 7% comp growth and a 16‑quarter streak of comp increases while wholesale also rose 8%.
• Management is cutting SKUs (~25%) to reduce promotions and boost full‑price selling, raised gross‑margin guidance and expects to finish the year closer to a 12% EBIT margin (up from 9%) with a path toward mid‑teens over time.
• Levi has expanded its addressable market to about $1.5 trillion by adding non‑denim categories that drove ~25% of quarterly growth, with women’s up 13% (now 38% of sales) and strong regional momentum in Asia (China +8%).

Levi Strauss & Co. NYSE: LEVI executives outlined what they described as broad-based momentum across channels, categories, and geographies during a J.P. Morgan retail fireside chat, highlighting recent growth, margin initiatives, and strategic priorities including direct-to-consumer expansion, SKU rationalization, and targeted brand segmentation.

Management points to broad-based growth and DTC momentum

CEO Michelle Gass said the company was “really pleased” to deliver 9% organic growth and 14% reported growth in the quarter, following 7% growth last year. She attributed results to strategies “gaining traction,” led by the company’s push to become a “best-in-class DTC first retailer.”

Gass said direct-to-consumer (DTC) is now half of Levi’s business and is expected to remain about half for the year. DTC was up 10% in the quarter, with 7% comp growth and 16 consecutive quarters of comp increases, according to Gass. She also emphasized that DTC gains have “not been at the expense of wholesale,” noting wholesale was up 8%.

CFO and Growth Officer Harmit Singh described the quarter as “the power of the and,” citing gains across U.S. and international markets, wholesale and DTC, men’s and women’s, and both average unit retail (AUR) and units. Singh added there was “a good balance between AURs and units.”

New categories and an expanded addressable market

Singh said Levi’s has expanded beyond the traditional denim market, describing an addressable market expansion from “a $100 billion denim segment” to “$1.5 trillion,” as the company leans into additional apparel categories built around a “denim aesthetic.” He said management has begun tracking a “new TAM,” which delivered 25% of growth in the quarter (and about a third of growth last year).

Gass said the company is expanding into “head-to-toe” assortments while remaining disciplined to avoid brand dilution, emphasizing that new categories complement core denim. She highlighted women’s as a major growth driver, saying women’s was up 13% in the quarter and that tops were also up 13%. Women’s represents 38% of the business today, which Gass said “should be 50%.”

On customer acquisition, Gass said that within e-commerce, 70% of new customers are in a younger consumer band, which she called “really exciting.”

SKU rationalization, full-price selling, and margin outlook

Singh said the company has reduced SKUs by “probably 25% around the world,” aiming to focus on “big bets” with more global commonality. He cited examples such as Low Loose and non-denim pants for men. The SKU work, he said, has supported better vendor negotiations and lower markdowns, and he said Levi’s is “reducing promotions” as product strength enables more full-price selling.

Singh also discussed margin drivers and Levi’s long-term profitability trajectory. He said the company raised full-year gross margin guidance from “flat to slightly up,” and characterized 30–40 basis points of annual gross margin expansion as “natural,” driven by mix shifts including women’s, DTC, and international growth. Singh said the company expects to close the year “closer to 12%” EBIT margin, up from 9% in 2023, and said the company is “on track” toward a mid-teens margin target over time.

Tariffs, guidance prudence, and regional outlook

Singh said the company “beat Q1 by a mile” on both top and bottom line and flowed about a third of the beat into full-year guidance, citing prudence due to timing early in the year and macro uncertainty. On tariffs, Singh said guidance assumed tariffs at “the old rate of 19%–20%, not at the 10%,” and estimated the upside at $35 million for the balance of the year and $0.07 in EPS, which Gass also referenced. Singh also noted $80 million of tax refunds related to tariffs paid, which he said was not incorporated in guidance.

Gass outlined the company’s expectations by region for the year, saying Levi’s expects:

• Europe: mid-single-digit growth
• Americas: low-single-digit growth (with an aim to outperform)
• Asia: high-single-digit growth

She called Asia underpenetrated for Levi’s and cited recent momentum, including China up 8% in the quarter. Singh added that Asia is about 20% of Levi’s business despite roughly half the world’s population being in the region, and said Asia operating margins have improved over the past three years as volume increased.

Brand segmentation, premium “Blue Tab,” and AI initiatives

Gass described a segmentation strategy anchored by Red Tab as the core, Signature as a value offering, and Blue Tab as a premium line. She said Signature was up 16% and targets value-conscious consumers at a $20–$30 price point, including distribution at Walmart and Amazon. For Blue Tab, Gass said Levi’s is “less than 1% share” in a $10 billion premium denim addressable market.

Singh said Levi’s tested Blue Tab last year and is now expanding tests, with next year focused on rollout. He said typical Red Tab items in Levi’s stores are “between $80–$120,” while Blue Tab is “about $250–$300,” adding that the company needs to improve storytelling as it scales.

On AI, Gass said it is a “huge priority” focused on enhancing consumer experience and improving efficiency. She described experiments to improve the online shopping journey and a “shopping agent” concept called “Indigo” in pilot stages with employees. Singh said the company is constraining incremental headcount and reallocating resources, citing an example where manual wholesale order entry that took “2–5 days” is being reduced to “15–20 minutes,” enabling staff to shift to higher-value work as volume grows.

Singh also discussed capital allocation priorities, including CapEx of 3.5%–4% of sales, a dividend growth approach “probably 8%–10% in line with net income,” and share repurchases to offset dilution. He said additional cash generation could be evaluated with the board, referencing the Dockers sale as an example of returning proceeds to shareholders.

Late in the discussion, Singh confirmed he plans to depart after helping transition to a successor, saying he has been with the company 13 years and expects to leave closer to 14 years.

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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