Levi Strauss & Co. (LEVI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong business momentum, evidenced by raised revenue growth expectations and optimistic guidance. Despite Q4 margin challenges, full-year metrics show expansion. The Q&A highlights strategic initiatives in DTC growth, international expansion, and product diversification, with positive analyst sentiment. Management's confidence in sustaining growth and improving margins further supports a positive outlook. Although some guidance details were withheld, the overall sentiment remains optimistic, suggesting a positive stock price reaction in the short term.
Key Financial Performance
Organic net revenue growth 7% year-over-year growth in 2025, driven by broad-based growth across all facets of the business.
Levi's brand growth 7% year-over-year growth in 2025, solidifying its position as the #1 denim brand globally.
DTC (Direct-to-Consumer) growth 11% year-over-year growth in 2025, now comprising approximately half of the total business. Margin expansion was driven by high single-digit comp growth and a more efficient operating structure.
Wholesale channel growth 4% year-over-year growth in 2025, supported by an expanded lifestyle assortment and new distribution.
Women's category growth 11% year-over-year growth in 2025, with double-digit growth in both tops and bottoms.
Men's category growth 5% year-over-year growth in 2025.
Gross margin Achieved the highest-ever gross margin in 2025, though Q4 gross margin contracted by 100 basis points to 60.8% due to tariffs, partially offset by pricing actions and higher full-price selling.
Adjusted EBIT margin Expanded by 70 basis points in 2025, reflecting disciplined growth conversion into profitability.
Q4 total company revenues Increased 5% year-over-year, with 7% growth during the November-December holiday season, marking the highest holiday revenue in a decade.
Beyond Yoga growth 45% year-over-year growth in Q4 and 17% growth for the full year 2025, driven by product expansion and strong DTC performance.
Adjusted diluted EPS (Q4) $0.41, higher than expectations, despite a $0.03 headwind from a higher tax rate.
Inventory levels Reported inventory dollars up 9% year-over-year, with units up 2%, primarily driven by tariffs.
Americas net revenues (Q4) Up 2% year-over-year, with U.S. DTC business growing 6% and LatAm business up 8%.
Europe net revenues (Q4) Up 10% year-over-year, led by double-digit growth in the U.K. and Germany.
Asia net revenues (Q4) Up 4% year-over-year, with double-digit growth in key markets like Japan and Turkey.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Head-to-toe product pipeline: Introduced the most robust head-to-toe product pipeline to date, driving growth across channels and increasing the total addressable market.
Tops category: Tops grew double digits in Q4, contributing nearly half of revenue growth, with strong demand for sweaters, wovens, and outerwear.
Blue Tab collection: Completed global rollout of the premium Blue Tab collection, with plans to expand in 2026.
AI-powered features: Launched AI-powered Outfitting feature in the Levi's app and plans to introduce an AI stylist chatbot for personalized recommendations.
DTC transformation: DTC business grew 11% in 2025, now comprising approximately half of total business, with significant margin expansion.
International growth: International business grew 8% in Q4, with Europe and Latin America leading growth. Asia also showed strong DTC performance.
Beyond Yoga expansion: Beyond Yoga grew 45% in Q4 and 17% for the year, with plans to expand retail presence and lifestyle assortment in 2026.
AI and advanced analytics: Scaling AI and advanced analytics to enhance consumer experiences and operational efficiencies, including a partnership with Microsoft for an AI platform.
Distribution network transformation: Transitioning U.S. distribution network to a hybrid model, with expected completion in 2026.
DTC-first strategy: Focused on becoming a DTC-first denim lifestyle retailer, driving faster growth and higher profitability.
Brand elevation: Elevating the Levi's brand through premium collections, collaborations, and culturally relevant marketing campaigns.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Tariffs Impact: Higher tariffs have negatively impacted gross margins and increased costs. The company is implementing pricing actions and cost management strategies to mitigate these impacts, but the issue remains a challenge.
Distribution Network Transition: The transition to a new third-party distribution center in the U.S. has taken longer than expected, leading to higher transitory distribution costs and operational inefficiencies. This is expected to continue through the first half of 2026.
Wholesale Channel Challenges: The global wholesale business was flat in Q4, with U.S. wholesale down due to capacity constraints in the new distribution center and strong prior-year growth from a key digital wholesale customer. The company plans to rationalize its wholesale footprint, which may limit growth in this channel.
Marketing Spend Timing: The timing of marketing spend, particularly the Q1-weighted global campaign, is expected to temporarily impact operating margins in the first quarter of 2026.
Economic and FX Pressures: Unfavorable foreign exchange rates and economic pressures have impacted SG&A expenses and operating margins, particularly in Q4.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Revenue Growth: The company expects organic net revenue growth of 4% to 5% in 2026, with a 1-point favorability from foreign exchange, resulting in reported net revenue growth of 5% to 6%. Growth is expected to be consistent mid-single digits throughout the year.
Segment Growth: By segment, the Americas are expected to grow low single digits, Europe mid-single digits, and Asia mid- to high single digits.
Channel Growth: DTC is expected to grow high single digits, fueled by positive comp sales, opening 50 to 60 net new system doors, and continued growth in e-commerce. Global wholesale is expected to be flat to slightly up.
Gross Margin: Gross margin is expected to be flat to prior year, with mitigation of tariff impacts through pricing actions, higher full-price selling, product cost reduction, and favorable mix. Gross margin expansion is expected to resume in 2027.
Adjusted EBIT Margin: Adjusted EBIT margin is expected to expand 40 to 60 basis points to a range of 11.8% to 12% in 2026.
Adjusted Diluted EPS: Full year adjusted diluted EPS is expected to grow and be in the range of $1.40 to $1.46, including a $0.04 headwind from a higher tax rate and a $0.20 drag from tariffs.
Capital Expenditures: CapEx is expected to be approximately $230 million, 3.5% to 4% of revenues, primarily to support store openings, fleet improvements, and digital investment.
Marketing Spend: Marketing spend is expected to be approximately 7% of total revenues, flat to 2025, with Q1 being marketing spend weighted due to the timing of the global marketing campaign.
Inventory Levels: Inventory levels at the end of fiscal 2026 are expected to be below revenue growth.
AI and Digital Investments: The company plans to expand AI usage, including launching a consumer-facing AI stylist chatbot and deploying an integrated AI platform to simplify and automate task-driven work, driving efficiency and productivity.
Product Pipeline: The company plans to expand its premium Blue Tab collection and launch a new global campaign during the Super Bowl, with additional global moments like the World Cup games at Levi's Stadium.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividend Increase: In Q4, Levi Strauss & Co. returned $55 million to shareholders, and for the full year, $363 million was returned, marking a 26% increase compared to the prior year. This included a 7% increase in the dividend.
Share Buyback Program: The company executed a $150 million share buyback in 2025, the highest annual buyback since the IPO. Additionally, Levi Strauss & Co. announced a $200 million Accelerated Share Repurchase (ASR) program to be completed within 3 to 6 months.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Are you taking the same conservative stance as in prior years with the guide of flat gross margins? How should we think about the first quarter gross margin, and can you unpack the drivers on cotton transit and tariffs?
A:Harmit Singh explained that the guidance for gross margins in 2026 is flat to the prior year, with structural drivers intact. Tariffs impact gross margins by 150 basis points, and FX headwinds add 20 basis points. These are offset by higher pricing, full-price selling, and lower product costs. The first quarter gross margin will be slightly down year-over-year, but improvement is expected as the year progresses.
Q:How does your mid-single-digit organic outlook for this year compare to the denim category? Where do you see opportunities to move to offense this year?
A:Michelle Gass stated that the company expects 4%-5% organic growth in 2026, outperforming the denim category. The company is transitioning from a denim bottoms business to a head-to-toe denim lifestyle company, with growth driven by categories outside denim bottoms, such as tops and non-denim items. Women's business grew 11% in 2025, and the company plans to continue fueling the denim category while expanding its total addressable market.
Q:Can you elaborate on the acceleration to 7% organic growth in November and December and any softening in top-line momentum post-holiday?
A:Harmit Singh highlighted strong holiday performance driven by DTC strategies and a focus on denim lifestyle. The company sold a variety of products, including sweaters and chinos, which contributed to the 7% organic growth. Confidence remains high for sustaining growth in 2026.
Q:What are the drivers for direct-to-consumer (DTC) channel margin growth, and where do you think the margins can go?
A:Michelle Gass explained that DTC margin growth will come from sales productivity, retail excellence, improved assortment planning, and a new global selling model. The company is leveraging new systems and focusing on driving higher volumes and operational efficiency. Margin expansion is expected to continue.
Q:Can you provide insights into Europe’s performance and the impact of the Blue Tab business?
A:Harmit Singh reported that Europe grew mid-single digits in 2025, with strong performance in the U.K. and Germany. Operating margins improved by 380 basis points. Michelle Gass added that the Blue Tab premium category, launched in early 2025, is showing positive early signs and represents a significant opportunity in the premium market.
Q:What improvements are you seeing in the supply chain, and how are you shortening go-to-market timelines?
A:Michelle Gass noted that lead times have been reduced from 16-17 months to 14 months, with a focus on global consistency and SKU reduction. A new Head of Supply Chain is driving strategies for efficiency. Harmit Singh mentioned progress in distribution transformation, with Europe fully transitioned and the U.S. expected to complete by year-end.
Q:Can you provide additional color on the delays related to the new distribution center (DC) and its SG&A impact?
A:Harmit Singh stated that the delays are being addressed with a strong team and third-party logistics partners. The parallel running of the DC will ease by mid-2026, with benefits expected in the second half. SG&A rates are expected to be lower than 50% of revenue in 2026.
Q:Can you discuss the pricing actions and their impact on growth by geography in 2026?
A:Michelle Gass explained that targeted pricing actions are focused on the U.S., with no significant consumer reaction observed. Pricing power is being leveraged in higher-tiered products, while maintaining modest pricing for entry-level items. Both AUR and units are expected to grow globally.
Q:What are your growth assumptions for the Americas business in 2026, and how is U.S. wholesale performing?
A:Harmit Singh stated that the U.S. grew 4% in 2025, with DTC up 6%. For 2026, the Americas are expected to grow low to mid-single digits, with U.S. wholesale flat to slightly up due to rationalization of nonstrategic accounts. Strategic wholesale accounts are performing well, with strong partnerships and category expansions.
Q:What does the business look like in your strategic wholesale accounts in the U.S.?
A:Michelle Gass emphasized strong partnerships with strategic wholesale accounts, which are embracing the denim lifestyle strategy. Tops, women's, and new categories like skirts and dresses are gaining traction. The company is leveraging DTC to test products before introducing them to wholesale.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance for 2027 gross margins, stating only that structural aspects will drive future acceleration. Additionally, they did not provide detailed breakdowns of AUR versus unit growth by geography, citing a lack of guidance at that level.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
DTC channel
Harmit
IR
Stadium
Strauss Co
Yoga
brand assortment
brand momentum
capability
closet
collection
consumer experience
culture
digit comp
engagement
evolution
fan
fit
foundation
gain brand
head toe
icon
lifestyle assortment
measure
men woman
music
opportunity consumer
portfolio
potential
premium
presence
productivity
progress brand
relevance
replay
response
retailer
stage
strength brand
youth
LEVI Transcript
Levi Strauss & Co. (LEVI) Q1 2026 Earnings Call Transcript
Positive4-7
The earnings call summary indicates solid financial performance, with strong DTC momentum and broad-based growth. The Q&A section reveals confidence in sustaining growth despite macro uncertainties, with conservative guidance due to prudence. The company's strategic focus on AI, loyalty programs, and premiumization supports positive sentiment. Although some management responses were vague, the overall sentiment remains positive, driven by growth in key segments and channels, and a strong product pipeline. The absence of a market cap suggests a neutral market reaction, but the positive outlook suggests a 2% to 8% stock price increase.
Levi Strauss & Co. (LEVI) Presents at UBS Global Consumer and Retail Conference Transcript
Neutral3-11
Levi Strauss & Co. (LEVI) Presents at Citi's 2026 Global Consumer & Retail Conference 2026 Transcript
Neutral3-9
Levi Strauss & Co. (LEVI) Q4 2025 Earnings Call Transcript
Positive1-28
The earnings call reveals strong business momentum, evidenced by raised revenue growth expectations and optimistic guidance. Despite Q4 margin challenges, full-year metrics show expansion. The Q&A highlights strategic initiatives in DTC growth, international expansion, and product diversification, with positive analyst sentiment. Management's confidence in sustaining growth and improving margins further supports a positive outlook. Although some guidance details were withheld, the overall sentiment remains optimistic, suggesting a positive stock price reaction in the short term.
LEVI Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
