Levi Strauss Starts Earnings Season Strong, Defies Tariff Fears With Beat-and-Raise Quarter

Levi Strauss delivered a standout second-quarter earnings report, joining Delta Air Lines in kicking off the Q2 earnings season with an upside surprise that temporarily soothed market fears about a looming consumer slowdown and the impact of tariffs. The denim icon exceeded expectations across revenue and earnings, raised full-year guidance, and emphasized strategic progress in its higher-margin direct-to-consumer (DTC) business. While it’s still early to declare Q2 a success for corporate America, the solid showing from Levi’s—alongside strong January-end reports in recent weeks—offered a dose of optimism for investors preparing for a turbulent earnings stretch defined by trade uncertainty and margin pressure.

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For the quarter, Levi’s reported adjusted EPS of $0.22, well above the $0.13 consensus, while revenue came in at $1.45 billion, beating estimates of $1.37 billion. Gross margin expanded 140 basis points year over year to a record 62.6%, helped by fewer markdowns, favorable product mix, and rising DTC penetration. Adjusted EBIT margin jumped 190 basis points to 8.3%, driven by leverage from revenue growth and continued focus on operating efficiency. All major regions contributed to growth, with organic sales up 9% in the Americas and 15% in Europe, while Beyond Yoga and the women’s category also posted strong double-digit gains.

The company also boosted its full-year outlook despite heightened tariff headwinds. It now expects adjusted EPS of $1.25 to $1.30 (up from $1.20–$1.25) and revenue growth of 1%–2% (versus prior guidance for a decline). Organic growth is expected to land in the 4.5%–5.5% range. Levi’s did reduce its gross margin expansion forecast to +80bps from +100bps, citing a 20bps full-year headwind from tariffs. However, management emphasized that strong brand equity, innovation-driven pricing, and disciplined promotion strategies are helping offset cost pressures. The company has already secured 60% of its needed inventory for the second half of the year, providing better visibility and flexibility.

Tariffs remain a wild card. While Levi’s sources just 1% of its goods from China, mid-to-high single digits come from Vietnam, and a significant share is tied to Bangladesh and Indonesia—countries now under threat of 30%+ tariffs under Trump’s reciprocal tariff plan. CFO Harmit Singh estimated a $25M–$30M hit to earnings for the rest of the year, or roughly 2–3 cents per share, but stressed mitigation efforts are working. CEO Michelle Gass told CNBC the company has been able to absorb costs without passing them to consumers, in part due to strong full-price sell-throughs and premium product innovations.

Strategically, Levi’s is becoming leaner and more focused. It’s exiting the Dockers brand, with the sale expected to close by early 2026, and reallocating resources toward its core Levi’s brand and high-growth categories like women’s apparel and tops. Women's revenue was up 14% and tops up 16% in Q2, both outperforming and marking Levi’s highest-margin segments. The DTC channel, now over 50% of the business, grew 11% and is driving both topline momentum and profitability. Online sales were up 13% and are now profitable due to improved scale and cost leverage.

Management’s tone during the earnings call was upbeat, with multiple analysts acknowledging improved execution and brand momentum. Guidance for Q3 includes organic sales growth of 4%–5%, EBIT margin of 10.8%–11.2%, and EPS of $0.28–$0.30. Analysts at Stifel and Telsey Advisory both raised their price targets to $24, citing improved fundamentals, tariff mitigation strategies, and strong DTC trends.

In a market preoccupied with macro noise, Levi’s delivered the kind of beat-and-raise quarter that provides much-needed signal. Investors will want to see if other consumer names follow suit, but for now, Levi’s has reasserted itself as a brand with pricing power, operating discipline, and consumer relevance—even in the face of rising geopolitical risk.