LEVI — Levi Strauss & Co.

Summary of Levi Strauss & Co. Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Revenue: Grew 7% year-over-year, with international markets contributing approximately 75% of the growth.
• Gross Margin: Reached a record 61.7%, up 110 basis points from the prior year, driven by a favorable business mix, pricing actions, and foreign exchange benefits.
• Adjusted EBIT Margin: 11.8%, exceeding expectations.
• Adjusted Diluted EPS: 34 cents, a year-to-date increase of approximately 25%.
• DTC Sales: Up 9%, with e-commerce growing 16%.
• Wholesale Sales: Increased by 5%, reflecting growth across all segments.

2. Strategic Updates and Business Highlights

• Transitioning to a DTC-first model, focusing on direct-to-consumer sales which now represent over 40% of the U.S. market.
• Continued emphasis on women's and tops categories, with women's business up 12% year-to-date.
• Successful marketing campaigns, including collaborations with Beyoncé and Nike, enhancing brand visibility and consumer engagement.
• Expansion in international markets, particularly in Asia, with double-digit growth in countries like India and Japan.
• Ongoing efforts in SKU rationalization, reducing SKUs by 15% while increasing productivity per SKU by 20%.

3. Forward Guidance and Outlook

• Q4 Expectations: Anticipate organic net revenue growth of approximately 1%, with reported revenues expected to decline by about 3% due to non-comparable items.
• Full-Year Guidance: Revenue growth revised to approximately 3%, with organic growth expectations increased to around 6%. Gross margin expected to expand by 100 basis points for the year.
• Adjusted Diluted EPS: Projected to be in the range of 36 to 38 cents for Q4.

4. Bad News, Challenges, or Points of Concern

• Tariff Impact: Higher tariffs expected to negatively affect gross margins by approximately 80 basis points in Q4.
• Complex Macro Environment: Cautious outlook due to potential demand fluctuations and economic uncertainties.
• Wholesale Channel Volatility: While wholesale has shown growth, there are concerns about sustainability and potential volatility in the future.

5. Notable Q&A Insights

• European Market: Despite challenges in the European marketplace, Levi's expects mid-single-digit growth, with strong performance noted in the UK.
• Consumer Demand: No significant changes in demand trends were observed in September or October, indicating resilience among consumers.
• Pricing Strategy: Recent price increases did not negatively impact demand, and the company plans to continue focusing on full-price selling and targeted pricing actions.
• Inventory Management: Inventory levels are strategically aligned for the holiday season, with 70% of necessary products already secured.

Overall, Levi Strauss & Co. reported a strong quarter with broad-based growth, particularly in DTC sales and international markets, while navigating challenges related to tariffs and macroeconomic conditions. The company remains optimistic about its strategic direction and market position moving forward.