Levi Strauss & Co. Q4 FY2025 earnings call

Michelle Gass noted the fourth quarter punctuated a strong year with progress against strategy, accelerating brand momentum, and solid financial performance. They've become DTC-first, exited non-core businesses, and pursued high return growth. Key highlights include Levi's brand growth, tops business acceleration, DTC transformation, global brand campaigns, and product evolution. Harmit Singh mentioned 2025 was strong with consistent profitable growth, expanding margins, and focus on denim lifestyle. Distribution network transformation in US is ongoing but took longer than expected, while Europe transition was successful.

In the fourth quarter, total company revenues increased 5% on top of 8% growth last year. The Levi's brand grew 4%, with men's and women's growth driven by core and newness. Tops grew double digits in Q4, driving nearly half of revenue growth. DTC business grew 10% in Q4 with fifteenth consecutive quarter of positive comps, e-commerce up 22%. Americas net revenues up 2%, US DTC grew 6%, US wholesale down, LATAM up 8%. Europe net revenues accelerated 10% in Q4, led by UK and Germany. Asia net revenues grew 4% year over year, fueled by strong DTC performance.

Expect organic net revenue growth of 4-5% in 2026 with 1 point favorability from foreign exchange, resulting in reported net revenue growth of 5-6%. Americas expected to grow low single digits, Europe mid-single digits, Asia mid to high single digits. DTC expected to grow high single digit. Gross margin expected to be flat to prior year with mitigation from pricing, full-price selling, product cost reduction. Adjusted EBIT margin expected to expand 40-60 basis points. Full year adjusted diluted EPS expected in range of $1.40 to $1.46. Q1 2026 adjusted EBIT margin expected to contract versus prior year due to marketing campaign timing, but adjust diluted EPS expected between 35-38¢.

No specific risks explicitly detailed in the provided transcript beyond general risks associated with forward-looking statements and market uncertainties.

Q: About gross margins, Harmit talked about offsetting tariff impact with pricing, etc.

A: Tariffs impact gross margins adversely by ~150 basis points, offset by higher pricing, full-price selling, lower product cost.

Q: How mid-single-digit organic outlook sizes up to denim category?

A: Levi's expects to outperform, has cemented number one share in US men's, women's, youth, and is expanding total addressable market.

Q: DTC channel margins can move higher?

A: Leverage from sales productivity, retail excellence, enhanced merchandising, improved assortment planning, new selling model.

Q: Europe trends?

A: Europe had strong year, up mid-single digit, Q4 up 10%, wholesale led growth, multiple markets grew.

Q: Supply chain improvements?

A: Shortened end-to-end lead time, increased globally directed line, reduced SKU count.

Q: DC delays and SG&A impact?

A: DC ramp-up in US took longer, but confident of completion by end of year, SG&A focus on leverage.

Q: Price increases and growth by geography?

A: Targeted pricing actions in US, expecting both AUR and units to grow.

Q: Americas business growth?

A: US expected low to mid-single digit, wholesale rationalization in nonstrategic accounts, core strategic accounts strong.

Q: Strategic wholesale accounts in US?

A: Strong partnerships, embracing denim lifestyle, tops, women's strategy, and head-to-toe expansion.