Levi Strauss raises profit guidance after tariff refunds
Levi Strauss lifted its 2026 earnings outlook after tariff refunds boosted third-quarter margins, while placing sales growth at the low end of its prior range.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
Levi Strauss raised its full-year profit forecast after tariff refunds lifted third-quarter results, while placing its expected revenue growth at the bottom of its previous range. The company’s Levi Strauss profit guidance now calls for adjusted earnings of $1.54 to $1.56 a share in fiscal 2026, up from $1.46 to $1.52, according to its results released Wednesday.
Levi said it expects full-year net revenue to rise 7%. That figure remains within its prior forecast of 7% to 7.5%, rather than representing a cut below the earlier range.
What did Levi Strauss report for the third quarter?
For the quarter ended Aug. 30, Levi reported net revenue of $1.61 billion, up 4% from a year earlier on a reported basis and 5% organically. Adjusted diluted earnings were 48 cents a share, and operating margin rose to 13.8% from 10.8% a year earlier, the company said.
Gross margin increased 4.5 percentage points to 66.2%. Net income from continuing operations was $169 million, while adjusted net income was $189 million, according to the company’s quarterly report.
The margin improvement was materially affected by refunds of tariffs levied under the International Emergency Economic Powers Act. Tariffs are taxes charged on imported goods; refunds can reverse costs previously paid by importers. Levi said the refunds added 490 basis points to both operating-margin and gross-margin expansion and contributed 16 cents to adjusted earnings per share.
Levi also said it put part of that benefit back into the business. About 160 basis points of the operating-margin benefit and about 5 cents a share of the earnings benefit were redeployed, leaving a net operating-margin contribution of 330 basis points and a net earnings contribution of 11 cents a share.
How were Levi Strauss sales performing?
Direct-to-consumer revenue rose 2% in the quarter, and comparable sales in that channel were broadly flat. Direct-to-consumer sales accounted for 45% of quarterly revenue, while wholesale revenue increased 6%, Levi said.
Revenue in the Americas grew 4%, though U.S. revenue fell 1%. Europe posted 4% reported revenue growth and Asia grew 5%, while wholesale gains were especially strong in those two regions, according to the company.
Chief Executive Michelle Gass said the direct-to-consumer business did not meet the company’s internal expectations. She said Levi had acted to address the shortfall and, based on more recent trends, expected mid-single-digit direct-to-consumer growth in the fourth quarter.
How did Levi use the tariff refunds?
The refunds included $79 million recorded in cost of goods sold and $5 million in interest income, offset by a $20 million tax expense impact, Levi said. The company said it incurred an additional $25 million of third-quarter expense by redeploying refund proceeds, including spending on promotions and marketing.
Of that redeployed amount, $19 million affected gross margin and $6 million affected selling, general and administrative expense. The result leaves investors with a higher earnings outlook that reflects refund-related gains, alongside a revenue forecast set at the low end of Levi’s earlier range.
This story draws on original reporting from CNBC.