Levi Strauss Q3 2026: Profit Beat, Guidance Up, Stock Down

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Levi Strauss (LEVI) beat third-quarter profit forecasts and lifted its 2026 EPS outlook on tariff refunds, yet shares closed 5% lower on a revenue miss.

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What Did Levi Strauss Report for the Third Quarter?

Levi Strauss reported adjusted EPS of $0.48, a gross margin of 66.2% and an adjusted EBIT margin of 15.5%. Gross margin expanded 450 basis points from a year earlier, and adjusted EBIT margin rose from 11.8%. Diluted EPS from continuing operations was $0.43.

Growth was uneven across channels and regions. Wholesale revenue rose 6%, e-commerce 10% and direct-to-consumer (DTC) sales 2%, with DTC comparable sales flat. DTC made up 45% of total revenue. On an organic basis, Asia grew 10%, Europe 5% and the Americas 2%. Beyond Yoga rose 9%. Inventory ended the quarter down 3% from a year earlier.

How Much Did Tariff Refunds Contribute?

Tariff refunds added about $0.16 to adjusted EPS before reinvestment, or $0.11 after. The company recorded $79 million of refunds of tariffs imposed under the International Emergency Economic Powers Act as a reduction to cost of goods sold, plus $5 million of interest income. The refunds lifted gross margin by 490 basis points, or 370 basis points net of about 120 basis points redeployed into the business.

Management said it received nearly all the refunds it expects. It plans to put about $60 million back into marketing, supply chain improvements and holiday promotions across the third and fourth quarters. Excluding the refund benefit, EPS still grew about 9%, helped by margin expansion and a lower share count.

Why Did the Stock Fall Despite the Beat?

Shares fell because the earnings beat leaned on a one-time tariff benefit while the sales picture softened. Revenue missed consensus by roughly $10 million, and the reported revenue growth outlook for the year moved to the low end of its range.

The weakest area was the US DTC business. The chief executive, Michelle Gass, said the back-to-school campaign under-delivered. The company had emphasized looser fits as demand shifted toward low-rise styles. Marketing, inventory and merchandising were repositioned toward low-rise denim late in the quarter, and management said results improved by September. In Europe, unseasonably warm weather held back store traffic before trends normalized as temperatures cooled.

What Changed in the Full-Year 2026 Guidance?

The profit outlook rose while the sales outlook was mixed. The updated guidance is below.

• Adjusted EPS: $1.54-$1.56, up from $1.46-$1.52.
• Reported revenue growth: about 7.0%, the low end of the prior 7.0%-7.5% range.
• Organic revenue growth: about 6.0%, the top of the prior 5.5%-6.0% range.
• Gross margin: up 130 basis points, versus 10 basis points previously.
• Adjusted EBIT margin: about 12.1%, versus 12.0% previously.

The guidance assumes current US tariff rates stay in place, at 30% on imports from China and 20% on the rest of the world, with no significant macroeconomic deterioration or currency volatility. Management expects fourth-quarter revenue to grow at a mid-single-digit rate and DTC to return to at least mid-single-digit growth. Global DTC is running at a mid-single-digit pace so far this quarter.

How Is Levi Strauss Returning Capital?

Levi Strauss announced a $100 million accelerated share repurchase program and a quarterly dividend of $0.16 a share, up 14% from a year earlier. The company ended the quarter with $641 million in cash and roughly $1.5 billion in total liquidity.

Strategic Context

The quarter shows the company's shift toward a more international, wholesale-led and diversified business. Asia and Europe outpaced the Americas, and wholesale outgrew DTC. Management has pointed to lifestyle categories and premium positioning, including the Blue Tab line, as growth drivers. The US DTC miss shows that product-fit misjudgments can still disrupt a business built on a single core category, denim.

Outlook

Levi Strauss enters the holiday quarter with a stronger earnings base, a larger buyback and a lower-risk balance sheet. Its sales recovery now depends on the low-rise pivot and a return to mid-single-digit DTC growth. Because most of the tariff refund benefit has now been booked, further earnings upside will have to come from revenue growth and underlying margins.