LEVI STRAUSS: OPERATING INCOME ROSE 32.8% TO $222.3M, BUT NET OF THE TARIFF REFUND IT ROSE 0.8%; REVENUE UP 4.3% ON WHOLESALE
By Pau Almar · Published
Q3 FY2026 · 7 OCTOBER 2026
Levi Strauss & Co. reported third-quarter net revenues of $1,609.7m against $1,543.4m, up 4.3% reported and 4.5% organic. Gross margin rose to 66.2% from 61.7% and operating income 32.8% to $222.3m. Net income from continuing operations rose 38.2% to $168.6m and diluted earnings per share were $0.43 against $0.31. The 10-Q discloses $78.6m of tariff refunds in cost of sales, of which $25m was redeployed into expense; net of that, operating income was $168.7m against $167.4m.
The refund is 68.8% of the gross profit increase and 143% of the operating income increase. Net of it, operating margin was 10.5% against 10.8%. Adjusted EBIT rose 36.4% to $248.7m, a 15.5% margin, or $195.1m (+7.0%) excluding the net refund; adjusted earnings per share were $0.48, or $0.37 excluding it. Selling, general and administrative expense rose 7.8%, faster than revenue.
// KEY NUMBERS
Q3 FY2026 · Q3 FY2026
| Revenue | USD 1,609.7m |
|---|---|
| Reported growth | +4.3% |
| Constant-currency growth | +4.5% |
| Gross margin | 66.2% |
| Operating margin | 13.8% |
| Like-for-like | +0.4% |
| Net income | USD 168.6m |
Wholesale revenue rose 6.0% to $882.3m. Direct-to-consumer rose 2.3% to $727.4m and fell to 45.2% of revenue from 46.1%; US direct-to-consumer fell 1% and e-commerce grew 10%, and management says direct-to-consumer fell short of internal expectations. The Americas supplied $32m of the $66m revenue rise at 2.5% organic growth; Europe grew 4.7% and Asia 9.6% organically.
Nine-month operating cash flow was $585.2m against $262.8m and adjusted free cash flow $427.3m against $92.5m. Inventories of $1,253.6m stand 1.3% above 30 November 2025, 210 days of third-quarter cost of sales, or 183 days before the refund. The company returned $370.3m in nine months and plans a new $100m accelerated repurchase.
Guidance moved to fiscal 2026 organic growth of about 6.0% and adjusted earnings per share of $1.54 to $1.56, from $1.46 to $1.52, with an adjusted EBIT margin of about 12.1%. VGR calculates that this implies fourth-quarter reported growth of about 2.1% to 2.7% and an adjusted EBIT margin of about 11.2% to 11.6%. The fourth-quarter release will show whether growth stays at or below 3% and whether US direct-to-consumer recovers from a 1% decline.
Source: Levi Strauss & Co. Reports Third-Quarter Results, Exhibit 99.1 to Form 8-K, 7 October 2026 ↗
Analysis by Pau Almar, VGR.
VGR analysis is an independent commercial reading of publicly disclosed company information, written from the perspective of a fashion retail sector operator. It is not investment research and it is not advice to buy, sell or hold any security. VGR is not a regulated financial adviser. Figures are taken from official company materials; figures derived by VGR are labelled as such. Readers should reach their own conclusions and take professional advice where appropriate.
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