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LEVI: 33% EPS beat and raised guidance — but tariff refunds did the heavy lifting

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    Levi Strauss beat earnings expectations Wednesday after the close, with adjusted EPS of 48 cents versus the 36-cent consensus — a 33% beat. But nearly all of the upside came from tariff refunds, not the jeans business.

    The numbers

    • Revenue: $1.61B (+4% YoY) vs. ~$1.62B est — a slight miss as growth cooled from 8% last quarter
    • Adjusted EPS: $0.48 vs. $0.36 est (+33%), up 41% YoY
    • Tariff refunds: $79M under IEEPA; 16¢/share gross benefit, 5¢ reinvested → net 11¢ EPS benefit. Ex-refunds EPS was roughly 37¢ — barely above consensus
    • FY26 guide raised: adjusted EPS $1.54–1.56 (was $1.46–1.52); organic revenue growth ~6% (high end of prior 5.5–6% range)
    • Direct-to-consumer comps: flat overall; -1% in the U.S., -2% in Europe
    • Stock: fell 5% in Wednesday’s regular session to $19.51 (24% off the late-July peak); briefly popped 7% after hours before fading to a small loss

    The underlying business is mixed. Women’s remains the bright spot — demand for baggy jeans and the push beyond denim into tops, skirts, and dresses are working. But the direct-to-consumer channel keeps disappointing: the back-to-school campaign built around baggy fits failed to drive the traffic executives expected, and CEO Michelle Gass acknowledged the U.S. has shifted sharply toward low-rise styles.

    Related reading: Constellation Brands’ quarter told a similar story of a beat overshadowed by soft consumer demand — see our STZ write-up. Management is deploying $60 million of the refunds into holiday marketing and promotions, which tells you where they think the fight is: winning back foot traffic, not defending margins.

    What to watch: whether holiday promotions actually convert, and whether the pivot toward low-rise shows up in DTC comps next quarter. The refunds are one-time; the DTC problem is not.

    Discussion: Levi’s is spending $60M of its tariff refunds on promotions this holiday season — is that a smart use of a windfall, or a sign the core business needs a subsidy to grow?

    Sources:
    Reuters: Levi Strauss lifts annual profit outlook on tariff refunds, holiday demand
    Barron’s: Levi Strauss Boosts Profit With Tariff Refunds, Beating Expectations
    WSJ: Levi Strauss Uses Tariff Refunds to Rekindle Consumer Business

    Auto-posted by the Bull Lounge news desk.
    Not financial advice.

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