Levi Strauss Q3 2026 Earnings: Tariff Refunds Drive Margin Expansion

Levi Strauss & Co. (NYSE: LEVI) reported fiscal Q3 2026 net revenue of $1.61 billion, up 4% as reported and 5% organically year over year, while diluted EPS from continuing operations rose to $0.43 from $0.31. Gross margin expanded 450 basis points to 66.2%, largely because of tariff refunds, while wholesale and international growth offset slower direct-to-consumer performance.

Core Results

The quarter combined mid-single-digit revenue growth with faster profit growth. Adjusted EBIT increased 36%, and net income from continuing operations rose 39%, as the gross-margin benefit more than offset higher selling, general and administrative expenses.

Adjusted SG&A increased 6.2% to $817 million, compared with reported revenue growth of 4%. The increase primarily reflected selling and distribution expenses, along with spending funded by part of the tariff refund benefit.

Adjusted figures are non-GAAP measures. Continuing-operations results exclude Dockers, which is classified as a discontinued operation.

Business and Segment Performance

Wholesale was the stronger channel, growing 6% across all segments, with particularly favorable results in Europe and Asia. DTC revenue increased 2% and represented 45% of total revenue, but comparable sales were roughly flat after high-single-digit growth in the prior-year period. E-commerce provided a relative bright spot with 10% growth.

International markets drove the strongest underlying expansion. Asia produced 10% organic growth, while the Americas reported slower organic growth and included a 1% decline in total U.S. revenue.

Within DTC, reported revenue increased 8% in Asia but declined 2% in Europe and 1% in the U.S. Management acknowledged that the channel fell short of internal expectations but said recent trends put DTC on track for mid-single-digit growth in Q4.

Tariff Refunds Accounted for Most of the Margin Expansion

Tariff refunds under the International Emergency Economic Powers Act included $79 million recorded in cost of goods sold and $5 million of interest income, partly offset by $20 million of related tax expense. The refunds contributed 490 basis points to both gross-margin and operating-margin expansion before reinvestment and added $0.16 to EPS.

Levi Strauss redeployed $25 million of the benefit during Q3, including $19 million that affected gross margin and $6 million in SG&A for promotion, marketing and other business support. After this spending, the net benefit was 370 basis points for gross margin, 330 basis points for operating margin and $0.11 per share for EPS.

The net refund contribution therefore accounted for most of the reported 450-basis-point gross-margin expansion. The 300-basis-point operating-margin increase was slightly smaller than the 330-basis-point net refund benefit, indicating that other operating factors collectively offset part of the gain.

Cash, Inventory and Capital Allocation

Levi Strauss ended the quarter with $641 million in cash and cash equivalents and approximately $1.5 billion in total liquidity. Inventory decreased 3% on a dollar basis from the prior-year quarter, limiting the balance-sheet buildup despite revenue growth.

The company distributed $61.6 million in quarterly dividends, equal to $0.16 per share. It also completed the $200 million accelerated share repurchase program launched in Q1, retiring 9.4 million shares over the program, including approximately 1.6 million delivered and retired during Q3. With $240 million remaining under its authorization, Levi Strauss intends to initiate another $100 million accelerated repurchase program.

Fiscal 2026 Guidance

Levi Strauss raised its full-year margin and adjusted EPS outlook while narrowing reported revenue growth to the low end of the previous range because of foreign exchange. Organic revenue growth is now expected at the top end of the prior range.

The outlook is based on continuing operations and includes the tariff refund impact. Levi Strauss expects to redeploy approximately $60 million of the benefit for the full year, including about $35 million in Q4. The guidance assumes current tariff rates remain in effect and that consumer, inflation, supply-chain and currency conditions do not deteriorate significantly.

Recent Insider Transactions

Supplemental insider data show 1,870,443 shares purchased across 44 transactions and 1,769,185 shares sold across 13 transactions during the last six months, producing net purchases of 101,258 shares. The latest ten reported entries were all direct director stock awards at $0.00 per share on August 5, 2026.

Because these transactions were stock grants rather than open-market purchases, they should be distinguished from cash buying by insiders.

Risks Investors Should Watch

• Dependence on tariff refunds: Refunds supplied most of the Q3 margin expansion and a net $0.11 EPS benefit after reinvestment. Changes in tariff rates or refund treatment could affect the profit outlook.
• DTC and U.S. execution: DTC revenue grew only 2%, comparable sales were roughly flat and U.S. revenue declined 1%. Delivering management’s expected mid-single-digit Q4 DTC growth is an important operating test.
• Expense growth: Adjusted SG&A increased 6.2%, faster than reported revenue, because of selling, distribution and reinvestment spending. This could weigh on profitability if refund-supported gross-margin gains do not persist.
• Guidance assumptions: The outlook assumes no significant worsening in consumer conditions, inflation, supply-chain disruptions, tariffs or currency fluctuations.

Summary

Levi Strauss delivered moderate revenue growth and substantially higher Q3 profit, with wholesale and international markets offsetting slower DTC and U.S. performance. Tariff refunds were the main reason margins and EPS expanded, even after the company reinvested part of the benefit. The raised full-year profit outlook points to stronger reported profitability, while DTC execution and the durability of refund-supported margin gains remain the central issues to monitor.