Levi Strauss & Co. — Third Quarter 2026 Earnings Summary

Financial Performance

• Reported net revenues increased 4% to $1.6 billion; organic net revenues increased 5% year-over-year.
• Nine-month reported net revenues grew 9% to $4.9 billion; organic net revenues grew 7%.
• Operating margin expanded to 13.8% in Q3 2026 from 10.8% in Q3 2025.
• Adjusted EBIT margin was 15.5% in Q3 2026, up from 11.8% in Q3 2025.
• Gross margin expanded 450 basis points to 66.2% in Q3 2026 from 61.7% in Q3 2025.
• Net income from continuing operations was $169 million in Q3 2026, up from $122 million in Q3 2025.
• Adjusted net income was $189 million in Q3 2026, up from $136 million in Q3 2025.
• Diluted EPS from continuing operations was $0.43 in Q3 2026, compared to $0.31 in Q3 2025.
• Adjusted diluted EPS was $0.48 in Q3 2026, compared to $0.34 in Q3 2025.
• Selling, general and administrative (SG&A) expenses were $836 million in Q3 2026, compared to $776 million in Q3 2025; adjusted SG&A increased 6.2% to $817 million.
• Interest and other income (expense), net, was an expense of $2 million in Q3 2026, compared to $11 million in Q3 2025.
• Effective income tax rate was 23.4% in Q3 2026, compared to 21.9% in Q3 2025.
• Cash and cash equivalents were $641 million as of August 30, 2026; total liquidity was approximately $1.5 billion.
• Total inventories decreased 3% on a dollar basis compared to Q3 2025.
• Adjusted free cash flow for the nine months ended August 30, 2026, was $427.3 million, compared to $92.5 million in the prior year period.

Guidance and Future Outlook

• Raised full-year 2026 reported net revenues growth guidance to approximately 7.0% (previously 7.0% to 7.5%).
• Raised full-year 2026 organic net revenues growth guidance to approximately 6.0% (previously 5.5% to 6.0%).
• Raised full-year 2026 gross margin guidance to up 130 basis points to prior year (previously up 10 basis points).
• Raised full-year 2026 adjusted EBIT margin guidance to approximately 12.1%, up 70 basis points to prior year (previously 12%, up 60 basis points).
• Raised full-year 2026 adjusted diluted EPS guidance to $1.54 to $1.56 (previously $1.46 to $1.52).
• Guidance assumes current tariff rates remain in effect and includes the impact of IEEPA tariff refunds, with approximately $60 million redeployed for the full year, including $35 million in Q4.
• DTC business is on track to deliver mid-single-digit growth in the fourth quarter.

Business Segments and Product Lines

• Americas net revenues increased 4% reported and 2% organic; U.S. net revenues decreased 1% reported.
• Europe net revenues increased 4% reported and 5% organic.
• Asia net revenues increased 5% reported and 10% organic.
• Beyond Yoga® net revenues increased 9% on a reported and organic basis.
• DTC net revenues increased 2% reported and organic; DTC comprised 45% of total net revenues.
• Wholesale net revenues increased 6% reported and organic, driven by growth in all segments, particularly Europe and Asia.
• E-commerce net revenues grew 10% reported and organic.
• DTC comparable sales growth was flat in Q3 2026.

Market and Competitive Landscape

• The company navigated a dynamic operating environment with strong growth in international and wholesale businesses.
• Tariff refunds under the International Emergency Economic Powers Act (IEEPA) contributed 490 basis points to gross margin expansion and 490 basis points to operating margin expansion.
• Approximately 160 basis points of tariff refund benefit were redeployed to support the business, resulting in a net benefit of 330 basis points to operating margin.
• Approximately 120 basis points of tariff refund benefit were redeployed to support the business, resulting in a net benefit of 370 basis points to gross margin.

Risks and Challenges

• DTC business fell short of internal expectations in Q3, though trends are accelerating heading into the holiday season.
• Future results depend on assumptions regarding macro-economic pressures, inflationary pressures, supply chain disruptions, potential tariffs, and currency fluctuations.
• Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations.

Management Commentary and Tone

• Michelle Gass, President and CEO, stated the third-quarter performance highlighted the power of the diversified portfolio and reinforced confidence in current strategies.
• Harmit Singh, Chief Financial and Growth Officer, noted mid-single-digit revenue growth and the decision to redeploy a majority of tariff refund benefits back into the business to support future growth.
• Management expressed confidence in the outlook, citing acceleration in recent trends for the DTC business.

Other Key Points

• The company plans to initiate a $100 million accelerated share repurchase (ASR) program.
• A $200 million ASR program launched in Q1 2026 settled in Q3, with the company retiring approximately 1.6 million shares (9.4 million total over the program).
• As of August 30, 2026, $240 million remained under the current share repurchase authorization.
• The company returned $61.6 million in dividends in Q3 2026, an 11% increase over the prior year, representing $0.16 per share.
• A new dividend of $0.16 per share was declared, a 14% increase over the prior year, payable November 4, 2026.
• The Dockers® business is reported in discontinued operations and excluded from non-GAAP measures.
• The Denizen® brand wind-down is excluded from organic net revenue calculations.