Has the denim category changed, and how should we think of 2027 margin versus the algorithm?

Denim remains healthy but more competitive; Levi's holds #1 in men's and women's. Singh says the algorithm is intact: 12.1% FY26 is the new base, and advertising and dual-DC costs won't repeat at this pace in 2027. “Our view is, all in, 12.1, we will lap that going forward. So that's our new base.”

Does wholesale sell-through in the U.S. and EU mirror DTC, and what does it mean for next year's orders?

Sell-through is healthy, AURs and units are up, and Europe pre-books are strong; Q4 wholesale growth will be a little weaker than Q3 due to timing, not demand. “wholesale in quarter 4 will be a little weaker than the wholesale you saw in quarter 3 in terms of growth year-over-year but it is not because of weakening demand.”

Will redeployed investments continue into H1 2027, and what growth is needed for operating leverage?

Singh said incremental expenses don't sustain into 2027, promotions were targeted rather than price cuts, and mid-single-digit growth allows P&L leverage; he declined to guide 2027. “the expenses, incremental expenses don't sustain into 2027.”

LEVI

Levi Strauss (LEVI) Q3 FY26 earnings call: guidance and Q&A

Q: What drove U.S. DTC weakness, monthly cadence, and are U.S. and Europe both mid-single digit in Q4?

Europe was weather-driven and has recovered; the U.S. back-to-school campaign emphasised loose when the market shifted to low-rise. Team pivoted at the end of Q3 and in September; U.S. DTC is positive and global DTC is running mid-single digits quarter-to-date. “we would say that our back-to-school campaign underdelivered our expectations.”

Earnings call· Aug 2026 (Q3 FY26)· Consumer Discretionary· Oct 7, 2026

Source: earnings call transcript

Executive summary

Levi Strauss & Co. Q3 FY26 — Wholesale and Asia strength offset by DTC miss; tariff refund redeployed

Levi's showed the benefits of a diversified model, with wholesale, Asia and lifestyle categories offsetting a DTC stumble tied to weather and a mistimed U.S. campaign. A one-time tariff refund flatters reported margins and is largely recycled into marketing, supply chain and promotions. Management points to September recovery and a CFO transition; 2027 hinges on lapping redeployment spend and distribution savings.

Highlights

Organic net revenues +5% (reported +4%); year-to-date organic growth +7%
Global Wholesale +6% with growth across all segments; International +8%, Asia +10% (seventh consecutive quarter of double-digit DTC growth in Asia), China +13%
Gross margin +450 bps to 66.2%; adjusted EBIT margin 15.5%; adjusted diluted EPS $0.48
Non-tariff adjusted EPS grew 9% YoY; non-tariff gross margin +80 bps and non-tariff EBIT margin +40 bps
Inventory down 3%; $62M dividends paid (+11% YoY) plus new $100M accelerated share repurchase

Concerns

Global DTC +2% with comp sales flat, below expectations on softer traffic in the U.S. (back-to-school campaign underdelivered, low-rise shift missed) and Europe (unseasonably warm weather)
Adjusted SG&A 50.8% of net revenues; ex-redeployment up 50 bps on higher distribution costs and DTC deleverage
Distribution network transition (Hebron DC closed end of Q3; fire-related incident) delayed; benefits now expected in 2027
Q3 margins flattered by ~$80M tariff refund (370 bps gross margin, 330 bps EBIT margin net of redeployment) — non-recurring
FY adjusted SG&A guide raised to ~51% from 49.7%-49.9%; reported revenue growth guide trimmed to ~7% from 7%-7.5% on stronger USD; Q4 wholesale growth to be weaker than Q3
CFO Harmit Singh departing; John Vandemore named successor

Guidance & targets

Category	Target	Timeline	Confidence
Full-year FY26 reported net revenue growth	approximately 7% high materiality	FY26	High
Full-year FY26 organic net revenue growth	approximately 6% high materiality	FY26	High
Full-year FY26 gross margin	approximately 63% including ~80 bps net tariff refund benefit high materiality	FY26	High
Full-year FY26 adjusted SG&A as % of revenue	approximately 51% high materiality	FY26	High
Full-year FY26 adjusted EBIT margin	approximately 12.1% (incl. ~30 bps net tariff benefit; ex-benefit +40 bps YoY) high materiality	FY26	High
Full-year FY26 adjusted diluted EPS	$1.54 to $1.56 including $0.04 net tariff refund benefit high materiality	FY26	High
Q4 FY26 net revenue growth	reported approximately 3%; organic approximately 4% high materiality	Q4 · FY26	High
Q4 FY26 gross margin	approximately 61.8%, up 100 bps YoY (incl. ~10 bps net tariff refund redeployment cost) medium materiality	Q4 · FY26	High
Q4 FY26 adjusted EBIT margin	approximately 11.4% to 11.6% incl. 180 bps net tariff refund redeployment costs high materiality	Q4 · FY26	High
Q4 FY26 adjusted diluted EPS	approximately $0.36 to $0.38 including $0.07 net tariff refund redeployment high materiality	Q4 · FY26	High
Q4 FY26 DTC growth	at least mid-single-digit growth; full-year DTC high single digit high materiality	Q4 · FY26	Medium
Q4 FY26 total women's business growth	up high single digits medium materiality	Q4 · FY26	Medium
Full-year FY26 global wholesale growth	mid-single digit medium materiality	FY26	High
Q4 FY26 wholesale growth	a little weaker YoY growth than Q3 (not due to weakening demand) medium materiality	Q4 · FY26	Medium
Q4 FY26 U.S. growth	return to growth low materiality	Q4 · FY26	Medium
Tariff refund redeployment	~3/4 of ~$80M redeployed (~$60M; ~$25M in Q3, ~$35M in Q4), ~60/40 SG&A/COGS high materiality	Q3-Q4 FY26	High
Net new system stores in Asia, Q4	nearly 60 net new system stores (many in Asia) low materiality	Q4 · FY26	Medium
Long-term operating margin and growth algorithm	mid-single-digit revenue growth with path to 15% operating (EBIT) margin over time high materiality	Long term	Medium
Distribution network cost benefits	benefits begin in 2027; FY26 is peak of transition costs medium materiality	FY27	Medium
Wholesale pre-bookings Spring/Summer 2027 (Europe)	up high single digits medium materiality	Spring/Summer 2027 · FY27	Medium
Inventory exiting FY26	in line with expected sales growth low materiality	FY26	Medium
FY27 gross margin	continue to grow gross margin medium materiality	FY27	Low

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Americas Margin expansion primarily from net tariff refund benefit; U.S. expected to return to growth in Q4 on improving DTC; U.S. wholesale positive. LATAM net revenues: +10%Operating margin change: +640 bps	—	+2%	—	Operating margin 29.9% (+640 bps)
Europe Growth in the UK, Germany and Italy; warm weather hit DTC traffic, which recovered as temperatures normalised. Wholesale growth: double-digitSpring/Summer 2027 wholesale pre-bookings: up high single digits	—	+5%	—	Operating margin 22.8% (+150 bps)
Asia Third consecutive quarter of double-digit growth; strength in Japan, India, Australia and China; Rose partnership driving women's. China net revenues growth: +13%Asia DTC: seventh consecutive quarter of double-digit growth	—	+10%	—	Operating margin 14.2% (+220 bps); YTD EBIT margin 16.7% (+240 bps)
International (combined) Led by Asia.	—	+8%	—	—
Levi's brand DTC pressure most pronounced in women's bottoms. Men's: mid-single-digit growthWomen's: mid-single-digit growthTops: +7%Women's tops: +10%Blue Tab: strong double-digit growth	—	+4%	—	—
Signature Core denim and lifestyle assortments both contributed.	—	+13%	—	—
Beyond Yoga Growth across both channels; Glow Zone performance collection launched in July.	—	+9%	—	—

LEVI operating KPIs by quarter

LEVI operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Feb 2026 Q1 FY26	May 2026 Q2 FY26	Change vs prior quarter
Loyalty program members	46M Our loyalty program also continues to be a powerful driver of consumer engagement, reaching 46 million members globally, up 17% year-over-year with more than 2 million new members added in the first quarter. Source: earnings call transcript	<50M This quarter, we welcomed 3 million new members to our loyalty program, bringing global membership to nearly 50 million. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
Levi's AI shopping assistant	launch	Q3 FY26 (U.S.)
levi.com redesign and platform migration	roadmap	Global launch next year (2027)
Beyond Yoga Glow Zone	launch	July 2026
Blue Tab	expansion	Ongoing
Sakai collaboration	launch	Recent

Deals & partnerships

Zalando Fall/winter campaign with Lily Collins in head-to-toe Levi's Fall/winter season

Transcribed as 'Zolando'; top European wholesale account.

Rose Brand partnership and collaboration with pop-ups in Bangkok, Tokyo, Shanghai, Seoul

Extended from Super Bowl global campaign.

Shaboozey Men's U.S. marketing partnership

Supports 501 loose and men's icons.

Sakai Collaboration collection

High-end couture collaboration.

Accelerated share repurchase counterparty (not named) $100M accelerated share repurchase $100M

Intended additional repurchase.

Risks & headwinds

DTC traffic softness in U.S. and Europe Q3 FY26 into Q4

Global DTC +2%, comps flat in Q3; DTC guided to at least mid-single digit in Q4

Mitigation:Reshot low-rise campaign, remerchandised stores, more marketing and inventory in low-rise, holiday activation plan

Distribution network transition cost and delays Benefits begin 2027

Adjusted SG&A ex-redeployment +50 bps in Q3; FY26 described as peak transition cost year

Mitigation:Closed Hebron DC at end of Q3; investments with partner on service levels and inventory

Non-recurring tariff refund inflates margins FY26; must be lapped in FY27

370 bps gross margin and 330 bps EBIT margin benefit in Q3 (net of redeployment); ~80 bps GM and ~30 bps EBIT margin for FY26; $0.11 Q3 EPS, $0.04 FY EPS

Mitigation:Treat 12.1% FY26 EBIT margin as new base; redeployment not repeated in 2027

Intensifying denim competition and promotional environment Holiday 2026

Not quantified; promotions ramped in Q3 and to be ramped down in Q4

Mitigation:Targeted holiday promotions, no list price cuts, increased marketing

Stronger U.S. dollar FX headwind Q4 FY26

~100 bps drag on Q4 reported growth; FY reported growth cut to ~7% from 7%-7.5%

CFO transition Near term

Not quantified

Mitigation:John Vandemore named successor

Q4 wholesale deceleration Q4 FY26

Q4 wholesale growth a little weaker than Q3's 6%

Mitigation:Pre-bookings for Europe SS27 up high single digits

What to watch in Q4 FY26

DTC growth rebound in Q4

Q4 FY26

Current Q3 DTC +2%, comp flat

Target At least mid-single-digit; FY DTC high single digit

Why it matters

The DTC recovery underpins the Q4 guide and the credibility of the corrective actions.

this gives us confidence that DTC will return to at least mid-single-digit growth in the fourth quarter

Find out whether LEVI delivers this. Inve re-checks your case every morning.

Q&A highlights

What drove U.S. DTC weakness, monthly cadence, and are U.S. and Europe both mid-single digit in Q4?

Europe was weather-driven and has recovered; the U.S. back-to-school campaign emphasised loose when the market shifted to low-rise. Team pivoted at the end of Q3 and in September; U.S. DTC is positive and global DTC is running mid-single digits quarter-to-date.

“we would say that our back-to-school campaign underdelivered our expectations.”

asked by Laurent Vasilescu · answered by Michelle Gass

2 min read 7 chapters

Detailed narrative

Q3 results and DTC shortfall

Organic net revenues rose 5% (reported +4%), taking year-to-date organic growth to 7%. Global Wholesale (+6%) and International (+8%) carried the quarter while DTC grew only 2% with flat comps. Management attributed the miss to softer traffic in the U.S. and Europe. Both regions had returned to positive trends by September and quarter-to-date in Q4.

U.S. DTC diagnosis and corrective actions

The U.S. back-to-school campaign centred on 'loose' while the market shifted to low-rise, so traffic was soft in July and August. The team reshot the campaign, remerchandised stores, deployed content creators, boosted low-rise inventory and leaned into men's icons (501 loose) with a Shaboozey partnership.

Management reported U.S. DTC back to positive and global DTC tracking mid-single digits quarter-to-date. Levi's says it remains #1 in U.S. men's, women's and youth, and is gaining share in the $100+ segment.

Tariff refund and redeployment

Levi's recorded about $80M of tariff refunds in Q3, which it says is substantially all the refunds it expects. About three-quarters (~$60M) is being redeployed: ~$25M in Q3 and ~$35M in Q4, split ~60/40 between SG&A and COGS. The spend goes roughly one-third each to marketing, distribution/logistics and promotions; Q3 skewed to promotions and inventory clearance, Q4 to advertising and distribution.

Management did not cut list prices, but chose to promote at key holiday moments.

Margins and distribution network

Gross margin expanded 450 bps to 66.2%, of which 370 bps came from net tariff benefit; non-tariff expansion of 80 bps came from lower product costs, partly offset by FX. Adjusted SG&A was 50.8% of revenue; ex-redeployment it rose 50 bps on higher distribution costs and DTC deleverage.

The U.S. distribution transition has run longer than planned, complicated by a fire-related incident; the Hebron DC closed at end of Q3, with benefits now expected in 2027. Europe's completed DC transformation is already yielding leverage.

Product, brands and categories

Levi's brand grew 4%, with men's and women's both up mid-single digits. Categories beyond bottoms drove ~half of growth; tops +7% and women's tops +10%. Blue Tab grew strong double digits (price points $200-$500, under 1% share of super-premium denim), Signature +13% and Beyond Yoga +9%. The Glow Zone performance collection launched in July.

International and segment trends

Asia grew 10% with Asia DTC posting a seventh straight quarter of double-digit growth; China was +13%. The Rose partnership generated over 3 billion impressions and ~$45M earned media value. Europe grew 5% on double-digit wholesale, while LATAM grew 10%. Asia's year-to-date EBIT margin is 16.7%, up 240 bps.

Outlook, algorithm and leadership transition

FY26 guidance now has organic growth near 6%, adjusted EBIT margin near 12.1% and adjusted EPS of $1.54-$1.56. Management says redeployment spending, elevated advertising and dual-DC costs will not repeat in 2027, supporting the algorithm of mid-single-digit growth and a path to 15% EBIT margin, while marketing intensity is expected to rise over time from roughly 7% of sales.

John Vandemore (ex-Skechers CFO) succeeds Harmit Singh, who made his final (56th) call.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.