Levi Strauss & Co. Class A Common Stock 2026 Q3 Earnings Call

Thank you for joining us on the call today to discuss the results for our third quarter of fiscal 2026. Joining me on today's call are Michelle Gass, our President and CEO, and Harmit Singh, our Chief Financial and Growth Officer. We'd like to remind you that we will be making forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in our reports filed with the SEC. We assume no obligation to update any of these forward-looking statements. Additionally, during this call, we will discuss certain non-GAAP financial measures which are not intended to be a substitute for our GAAP results. Definitions of these measures and reconciliations to their most comparable GAAP measure are included in our earnings release, available on the IR section of our website, investors.levistrauss.com.

Please note that Michelle and Harmit will be referencing organic net revenues or constant currency numbers unless otherwise noted, and the information provided is based on continuing operations. Finally, this call is being webcast on our IR website, and a replay of this call will be available on the website shortly. Today's call is scheduled for one hour, so please limit yourself to one question at a time to allow others to have their questions addressed. Now I'd like to turn the call over to Michelle.

Welcome, everyone, and thank you for joining us. Over the past several years, we have transformed Levi Strauss & Co. into a more diversified, higher growth company.

We have sharpened our focus on the areas where we see the greatest opportunities to win, expanded internationally, built a more balanced DTC and wholesale model, and evolved Levi's from a denim bottoms business into a leading global denim lifestyle company. While we delivered strong results across much of the business, our DTC performance fell short of our expectations during the quarter. As we'll discuss on the call, we have a clear understanding of what worked and what did not, and we have already taken targeted actions to improve performance. Before I turn to our Q3 results, I'd like to take a moment to speak to the CFO appointment we announced last week. I'm delighted to share that we have named John Vandemore as the company's next CFO.

John brings more than two decades of financial leadership experience across global consumer businesses, most recently serving as CFO of Skechers, where he helped support its growth into one of the world's largest footwear brands. He is a proven operator with deep financial expertise, a track record of driving profitable growth and margin expansion, and strongly aligns with our strategy, brand, and culture. I also want to take this opportunity to thank Harmit for his leadership and dedication over the past 14 years. He has played an important role in transforming Levi Strauss & Co. into a more Direct-to-Consumer, diversified, and profitable company. Harmit has been a trusted partner to me and to our leadership team, and I'm grateful for his many contributions to the company. Now turning to Q3. As a reminder, all numbers Harmit and I will reference are on an organic basis.

The quarter again demonstrated the benefits of our diversified portfolio and reinforced our confidence that we have the right strategies in place to drive sustainable, long-term, profitable growth. We delivered another quarter of mid-single-digit growth, up 5% on an organic basis. Year to date, our business is up 7% versus the prior year. Our international business grew 8% this quarter, led by Asia, which has been a consistent source of strength throughout the year and delivered another quarter of double-digit growth while profitability continues to improve as the business scales. Global wholesale continued its strong momentum, up 6%, with growth across all segments. Our strategy to expand beyond denim continues to deliver results. Categories outside our Levi's denim bottoms business accounted for approximately 50% of our top-line growth in the quarter, driven in part by accelerating momentum in tops, which grew 7%.

That said, DTC performance in the quarter fell short of our expectations, driven primarily by softer traffic trends in both the U.S. and Europe. In Europe, unseasonably warm weather across several key markets weighed on traffic for much of the quarter. As temperatures normalized, traffic and sales trends improved meaningfully, and those improvements continued into Q4 quarter to date. In the U.S., while our marketing continued to generate strong consumer engagement and reinforce brand heat, we had fewer major brand-building moments than a year ago. In addition, our back-to-school campaign did not drive the level of traffic and demand we had anticipated. Importantly, we moved quickly to address these U.S. traffic challenges and have a clear plan to improve performance. We are increasing investment behind areas of strong consumer demand, particularly low-rise fits, and strengthening inventory positions accordingly.

We are deepening our marketing investments, creating a stronger cadence of traffic-driving moments, and placing greater emphasis on mid-funnel product marketing. We are strengthening commercial execution across our stores and digital channels with a sharpened focus on conversion and other key productivity metrics.

Since implementing these actions, we have seen positive trends in our U.S. Direct-to-Consumer business. Combined with the continued improvement in Europe, this gives us confidence that DTC will return to at least mid-single-digit growth in the fourth quarter and deliver high single-digit growth for the full year. To support these efforts and fuel growth, we are redeploying a substantial majority of the tariff refunds we recorded in the third quarter back into the business across both Q3 and Q4. In addition to increased marketing investments, we are putting those funds to work behind sharper value for consumers during key holiday promotional moments and enhanced supply chain capabilities to strengthen our competitive position and support sustainable long-term growth. I will now walk you through the highlights from the quarter in the context of our strategies. Starting with our first strategy to be brand led.

In Q3, we continued to reinforce Levi's position at the center of culture through impactful campaigns, premium experiences, and iconic brand moments around the world. A recent example of this was our partnership with one of our top European wholesale accounts, Zalando, for its fall-winter campaign that featured Lily Collins in head-to-toe Levi's and showcased the breadth of our denim lifestyle offering across Europe. Our debut at Paris Couture Week was another milestone in the elevation of the brand, bringing Levi's to one of fashion's most influential and prestigious global stages. Looking ahead, we have a consistent drumbeat of brand activations and marketing moments planned through year-end with high-impact partnerships, including Shaboozey. We are amplifying our strongest product franchises, such as loose, low rise, and Superlow, through increased marketing support and compelling product storytelling.

For the holidays, we are as prepared as we have ever been with our most robust activation plan in years. From breakthrough brand moments and experiential pop-ups to elevate store experiences, personalized styling, and curated gifting assortments, we are creating new ways for consumers to engage with Levi's throughout the holiday season. Combined with strong product newness and focused commercial execution, these efforts are designed to drive traffic, improve conversion, and deepen consumer connection with the Levi's brand. Now turning to product. The Levi's brand grew 4% with both men's and women's growing mid-single digits. While DTC pressure was most pronounced in our women's bottoms business, we have moved quickly to increase support behind winning trends and strengthen execution. Encouragingly, the DTC women's business accelerated in September, and we expect our total women's business to be up high single digits in Q4.

In men's bottoms, newer iterations of our icons, including the 501 Loose and 501 Relaxed, continued to gain traction, demonstrating our ability to drive growth through both heritage and innovation. In women's, we saw strong demand for wider leg silhouettes, and the low rise trend continued to fuel growth with our Low Loose and newer platforms like the Cinch Baggy delivering standout performance. These strong-performing franchises give us confidence in our ability to further scale proven fits and drive future growth. Importantly, growth in the quarter was balanced across both our core denim business and our expanding lifestyle assortment. Categories beyond bottoms contributed roughly half of our growth in the quarter, expanding our addressable market and building Levi's into a true denim lifestyle company. Tops delivered a solid quarter of growth led by women's tops, which increased 10%.

Growth was broad-based across the assortment with strong momentum in blouses, wovens, sweaters, outerwear, and tees. Blue Tab continues to exceed our expectations, delivering strong double-digit growth with broad-based strength across both men's and women's. As we expand the assortment into more elevated products, including cashmere and premium knitwear, Blue Tab is extending the brand into higher price points, attracting new consumers, and further premiumizing the Levi's brand in the marketplace. Entering our fourth quarter, we are confident in our holiday assortment and the continued opportunity to build on the momentum we're seeing across our lifestyle categories. Sweaters will be a key focus, complemented by fresh denim innovation across both men's and women's. Taken together, we are entering the holiday season with a stronger assortment, exciting newness across both lifestyle categories and denim, and a compelling offering for consumers around the world.