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What Levi Strauss & Co. (LEVI) said on its Q3 earnings call. Levi Strauss & Co. (NYSE:LEVI) reported third-quarter fiscal 2026 revenue growth that was supported by international markets, wholesale and product categories beyond denim bottoms, while softer store traffic in the United States and Europe weighed on its direct-to-consumer business. For the quarter ended Aug. 30, reported net revenue increased 4% and organic net revenue rose 5%. Year-to-date organic revenue growth was 7%, according to President and Chief Executive Officer Michelle Gass. International revenue grew 8%, global wholesale rose 6%, and categories outside Levi's denim bottoms business generated about half of the company's top-line growth. Discover more Account Management Tools Local Business Directory "The quarter again demonstrated the benefits of our diversified portfolio," Gass said, while acknowledging that direct-to-consumer performance "fell short of our expectations during the quarter." Direct-to-Consumer traffic pressure. Global direct-to-consumer revenue increased 2% during the quarter, while comparable sales were flat from a year earlier. Gass attributed the shortfall primarily to softer traffic in the U.S. and Europe. In Europe, unusually warm weather in several key markets reduced store traffic for much of the quarter, the company said. Gass said traffic and sales improved as temperatures normalized, with the improvement continuing into the fourth quarter. In the U.S., Gass said the company's back-to-school campaign did not generate the traffic and demand it anticipated. The campaign emphasized loose fits, while consumer attention had shifted toward lower-rise styles, she said. Levi Strauss responded by increasing marketing behind low-rise fits, strengthening inventory positions and adjusting store merchandising and digital efforts. The company said its U.S. direct-to-consumer business had returned to positive growth during the fourth quarter to date. Levi Strauss expects global direct-to-consumer growth of at least the mid-single digits in the fourth quarter and high-single-digit growth for the full year. Its e-commerce channel recorded another quarter of double-digit growth. The company also recently launched an artificial-intelligence shopping assistant in the U.S., which provides styling suggestions and outfit recommendations. Gass said consumers using the tool have added items to their carts at about three times the company's average rate, though she characterized the initiative as early stage. International, wholesale and product growth. Asia remained a key growth driver, with segment revenue up 10% for the third consecutive quarter of double-digit growth. China revenue rose 13%, while growth also came from Japan, India and Australia. Levi Strauss plans nearly 60 net new system stores in Asia during the fourth quarter. Latin America revenue increased 10%, with growth across channels and markets. The company said its direct-to-consumer businesses in both Latin America and Asia remain underpenetrated relative to the company average. Wholesale momentum continued across regions and categories. Chief Financial and Growth Officer Harmit Singh said sell-through was healthy, with both average unit retail prices and unit sales higher. He noted that wholesale growth in the fourth quarter is expected to be lower than the third quarter due to the timing of product flows to customers, rather than weaker demand. European wholesale pre-bookings for spring/summer 2027 were up high single digits. The Levi's brand grew 4%, with mid-single-digit growth in both men's and women's. Tops increased 7%, led by a 10% rise in women's tops. Blue Tab, the company's premium offering, delivered double-digit growth, while Signature revenue rose 13% and Beyond Yoga revenue increased 9%. Tariff refunds lift margins, fund reinvestment. Levi Strauss recorded approximately $80 million in tariff refunds during the third quarter, representing substantially all refunds it expects to receive. The company plans to redeploy roughly three-quarters of the benefit into marketing, supply-chain capabilities and consumer promotions. About $25 million was redeployed in the third quarter, with another roughly $35 million expected in the fourth quarter. Singh said the company was allocating approximately one-third of the redeployed amount to marketing, one-third to distribution and logistics, and one-third to promotional activities. Third-quarter gross margin expanded 450 basis points to 66.2%. Tariff refunds, net of redeployments, contributed 370 basis points of the improvement. Adjusted EBIT margin was 15.5%, including a 330-basis-point net benefit from tariff refunds. Adjusted diluted earnings per share were $0.48, including an $0.11 benefit from refunds net of redeployment. Excluding tariff-related effects, Singh said gross margin improved 80 basis points, supported by lower product costs, while adjusted EBIT margin expanded 40 basis points, reflecting improving margins in Asia and wholesale growth. The company also said distribution costs were higher than expected as it transitions its U.S. network. Levi Strauss closed its Hebron distribution center at the end of the third quarter and expects to begin realizing benefits from that closure in 2027. Management said a fire-related incident and the complexity of the network transition delayed expected savings. Updated outlook and CFO transition. For fiscal 2026, Levi Strauss now expects reported revenue growth of approximately 7%, compared with its previous outlook of 7% to 7.5%, reflecting a stronger U.S. dollar. Organic revenue growth is expected to be approximately 6%, at the high end of its previous expectations. * Full-year gross margin is expected to be about 63%, including roughly 80 basis points of net tariff-refund benefit. * Adjusted EBIT margin is projected at approximately 12.1%, including about 30 basis points of net tariff benefit. * Adjusted diluted EPS is forecast at $1.54 to $1.56, including a $0.04 net tariff-refund benefit. * Fourth-quarter organic revenue growth is expected to be about 4%, while reported revenue growth is expected to be about 3% due to foreign exchange. * Fourth-quarter adjusted diluted EPS is expected at $0.36 to $0.38. The company returned $62 million to shareholders through dividends during the quarter, an 11% increase from a year earlier, and said it intends to repurchase an additional $100 million in shares through an accelerated share repurchase program. Levi Strauss also announced that John Vandemore, most recently chief financial officer of Skechers, will become its next CFO. Singh, who has been with the company for 14 years, said the call was his 56th and final earnings call with Levi Strauss. About Levi Strauss & Co. (NYSE:LEVI). Levi Strauss & Co is an apparel company best known for its Levi's brand of denim jeans and related clothing. Its product portfolio includes jeans, tops, bottoms, jackets, footwear, accessories and other casualwear for men, women and children. Founded in 1853 and headquartered in San Francisco, California, the company also owns the Dockers, Beyond Yoga and Signature by Levi Strauss & Co brands. Levi Strauss & Co sells its products through company-operated stores, e-commerce platforms, wholesale partners and other distribution channels. The company serves customers in North America, Europe, Asia and other international markets.

US' Levi Strauss raises FY26 profit outlook after strong Q3. 08 Oct '26 Insights. * Levi Strauss & Co raised FY26 earnings and margin guidance after Q3 revenue rose 4 per cent to $1.61 billion, with operating income up 33 per cent to $222.3 million. * International and wholesale gains led growth; organic revenue rose 10 per cent in Asia and wholesale revenue 6 per cent. * Gross margin expanded 450 bps to 66.2 per cent on tariff refunds; adjusted EPS guidance rose to $1.54-1.56. American apparel company Levi Strauss & Co has raised its fiscal 2026 (FY26) profit outlook following a third-quarter (Q3) performance supported by international and wholesale growth, lifestyle-category momentum and stronger profitability. The net revenue of the company increased by 4 per cent year on year (YoY) to $1.61 billion in Q3 ended August 30, 2026, while organic net revenues rose 5 per cent. The operating income climbed 33 per cent to $222.3 million and net income from continuing operations increased 38 per cent to $168.6 million. Adjusted earnings before interest and tax (EBIT) rose 36 per cent to $248.7 million. The company said it had moved to address direct-to-consumer (DTC) performance that fell short of internal expectations and anticipated improved momentum during the holiday season. "Our third-quarter performance highlighted the power of our diversified portfolio and reinforced our confidence that we have the right strategies in place," said Michelle Gass, president and CEO, Levi Strauss & Co. "We saw strong growth in our international and wholesale businesses, and continued momentum across our lifestyle categories." "We delivered another quarter of mid-single-digit revenue growth while navigating a dynamic operating environment," said Harmit Singh, chief financial and growth officer, Levi Strauss & Co. "We made the decision to redeploy a majority of our tariff refund benefit back into the business during Q3 and Q4 to support future growth." Asia and wholesale support revenue growth Americas net revenues rose 4 per cent to $838.8 million, although US revenue declined 1 per cent. Europe revenue increased 4 per cent to $442.1 million, while Asia revenue rose 5 per cent to $292.8 million. On an organic basis, revenue grew 2 per cent in the Americas, 5 per cent in Europe and 10 per cent in Asia, Levi Strauss said in a press release. The operating income in the Americas increased 32 per cent to $251 million, while Europe recorded an 11 per cent increase to $101 million and Asia posted a 25 per cent rise to $42 million. Beyond Yoga revenue rose 9 per cent to $36 million, while its operating loss was unchanged at $5 million. Wholesale revenue increased 6 per cent to $882.3 million, driven by growth across all segments, particularly in Europe and Asia. DTC revenue rose 2 per cent to $727.4 million and accounted for 45 per cent of quarterly revenue. E-commerce revenue grew 10 per cent, while DTC comparable sales were broadly flat. Levi's brand revenue increased 4 per cent to $1.51 billion, and Levi Strauss Signature revenue rose 12 per cent to $66.9 million. Tariff refunds lift margins and earnings The gross profit rose to $1.07 billion from $951.6 million a year earlier, with gross margin expanding 450 basis points (bps) to 66.2 per cent. Operating margin improved to 13.8 per cent from 10.8 per cent, while adjusted EBIT margin increased to 15.5 per cent from 11.8 per cent. Tariff refunds contributed 490 bps to both gross-margin and operating-margin expansion. Levi Strauss redeployed approximately 120 bps of the gross-margin benefit and 160 bps of the operating-margin benefit into promotion, marketing and other business-support measures during the quarter. Selling, general and administrative expenses rose to $835.9 million from $775.6 million, while adjusted expenses increased 6 per cent to $817.1 million. Adjusted net income increased 39 per cent to $188.9 million, and adjusted diluted earnings per share (EPS) rose to $0.48 from $0.34. Diluted EPS from continuing operations increased to $0.43 from $0.31. The effective tax rate was 23.4 per cent, compared with 21.9 per cent a year earlier. Liquidity remains solid Cash and cash equivalents stood at $641.4 million at the end of the quarter, while total liquidity was approximately $1.5 billion. Inventory declined 3 per cent from a year earlier. Quarterly operating cash flow increased to $102.9 million from $24.8 million, while capital expenditure fell to $58.6 million from $64.2 million, resulting in adjusted free cash flow of $44.3 million compared with an outflow of $39.4 million a year earlier. Levi Strauss raises FY26 margin and EPS guidance The company raised its earnings and margin guidance for the year ending November 29, 2026, while narrowing its reported net revenue growth forecast to approximately 7 per cent due to foreign exchange effects, compared with its previous range of 7-7.5 per cent. Organic net revenue growth was projected at approximately 6.0 per cent, the upper end of the previous guidance range of 5.5-6 per cent. Gross margin was expected to increase by 130 basis points from the prior year, compared with the previously anticipated improvement of 10 basis points. The company also raised its adjusted EBIT margin outlook to approximately 12.1 per cent, representing a year-on-year expansion of 70 basis points. Previously, it had forecast a margin of 12.0 per cent, up 60 basis points. Adjusted diluted EPS guidance was increased to $1.54-1.56 from $1.46-1.52. Both ranges included an estimated $0.04 headwind from a higher tax rate. The tax rate forecast remained unchanged at approximately 23 per cent, two percentage points higher than the prior year. The outlook incorporates International Emergency Economic Powers Act tariff refunds and the planned redeployment of approximately $60 million into the business during FY26, including about $35 million in the fourth quarter, and assumes current tariff rates remain in place. Fibre2Fashion News Desk (SG)