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.
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.
