LEVI — Levi Strauss & Co.

Summary of Levi Strauss & Co. Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Organic Net Revenues: Increased by 6% year-over-year, with total reported revenues up 8%.
• Earnings Per Share (EPS): Adjusted diluted EPS rose 27% to $0.28, exceeding guidance.
• Gross Margin: Expanded by 10 basis points to 62.7%, supported by lower product costs and pricing actions.
• Adjusted EBIT Margin: Increased 70 basis points to 9%, with adjusted EBIT dollars growing 18% faster than revenue.
• Free Cash Flow: Increased nearly 80% year-over-year to $231 million.
• Inventory Management: Inventory decreased by 7%, reflecting improved management practices.

2. Strategic Updates and Business Highlights

• DTC Focus: Direct-to-consumer (DTC) revenue grew 8%, representing 51% of total revenue. Comparable sales were up 6%, marking the 17th consecutive quarter of growth.
• International Growth: International markets saw a 6% revenue increase, with Asia leading at 12%. Mexico celebrated 60 years of brand presence, contributing significantly to growth.
• Product Innovation: Continued emphasis on expanding the denim lifestyle brand, with notable growth in women's categories (up 11%) and tops (up 5%).
• Marketing Initiatives: Successful campaigns, including collaborations with local celebrities and a viral marketing moment during the World Cup, drove brand engagement and visibility.
• ERP Transformation: Progress on the global ERP system is expected to enhance operational efficiency and data access, aiming for completion by mid-2027.

3. Forward Guidance and Outlook

• Revenue Guidance: Full-year revenue expected to increase by 7% to 7.5%, with organic growth projected at 5.5% to 6%.
• EPS Guidance: Adjusted diluted EPS guidance raised to approximately $1.46 to $1.52.
• Store Openings: Anticipating 50 to 60 net new store openings in 2026, with the majority in the second half.
• Q3 Expectations: Projected revenue growth of 4% to 5%, with gross margin expected to expand around 10 basis points.

4. Bad News, Challenges, or Points of Concern

• Tariff Risks: Ongoing uncertainty regarding tariffs, particularly a potential increase on imports from China, remains a concern.
• Distribution Center Transition: The U.S. distribution center transition is taking longer than anticipated, which could impact operational efficiency and cost savings.
• Competitive Pressures: While the denim category is stable, there are concerns about the promotional environment and potential shifts in consumer behavior.

5. Notable Q&A Insights

• U.S. Wholesale Performance: There was a noted slowdown in the Signature brand's growth, which is expected to recover in the second half of the year.
• European DTC Growth: DTC in Europe accelerated to 7%, with confidence in maintaining mid-single-digit growth for the second half.
• Consumer Resilience: The consumer base remains resilient across various segments, with growth driven by both unit sales and AUR (Average Unit Retail).
• BlueTab Expansion: The premium denim segment (BlueTab) is gaining traction, with expectations for significant growth as the brand expands its offerings.

Overall, Levi Strauss & Co. reported a strong quarter with positive momentum across various channels and markets, while also navigating challenges related to tariffs and distribution transitions. The company remains optimistic about its growth trajectory and strategic initiatives moving forward.