Levi's CEO Says Back-To-School Push 'Under Delivered,' And Tariff Refunds Will Pay To Fix It
Levi Strauss is redirecting about three quarters of $80 million in tariff refunds into marketing, logistics and promotions after a weak U.S. quarter.
Levi Strauss CEO Michelle Gass said on the company's third-quarter earnings call Wednesday that the back-to-school campaign "under delivered our expectations," and that the company is putting most of its tariff refunds back into the business to correct course. CFO Harmit Singh put the refunds recorded in the quarter at about $80 million.
What management said went wrong
Gass told analysts the campaign was built around loose fits, while the U.S. market had moved toward low rise. She said softening began in July and August.
The team reshot the campaign, re-merchandised stores and put an existing group of social media content creators to work. Those changes were in place "right as we started September," she said.
She framed the miss as tactical, not a brand problem. Wholesale grew 6% and international grew 8%, and organic revenue rose 5% for the quarter. Global direct-to-consumer (DTC) sales grew 2%, with comparable sales flat.
In Europe, she blamed unseasonably warm weather for weaker traffic. Coverage of the call described the weak U.S. quarter alongside those heat-driven declines.
How the refund money is being spent
Singh said the company recorded about $80 million of tariff refunds in the third quarter. It is redeploying roughly three quarters of that benefit: about $25 million in the third quarter and about $35 million in the fourth.
Asked by a Goldman Sachs analyst about the split, Singh said the $60 million is divided evenly. A third goes to marketing, a third to distribution and logistics, and a third to promotions, with promotions ramping down in the fourth quarter.
Gass said U.S. DTC sales have turned positive and global DTC is tracking mid-single digits. Management expects DTC to return to at least mid-single-digit growth in the fourth quarter and high single digits for the full year.
She also said the Rosie partnership and pop-ups in Bangkok, Tokyo, Shanghai and Seoul generated more than 3 billion impressions and about $45 million in earned media value.
What to watch
Management plans to discuss its 2027 financial plans early next year. The fourth-quarter DTC target and the fading promotions will be the first test of the pivot.
The call also covered a leadership change. Gass said the company named John Vandamore, most recently CFO of Skechers, as its next CFO, and thanked Singh for 14 years of service. Levi shares closed at $19.51 on Wednesday, down 4.97%, for a market cap of $7.9 billion (market data).
The fourth-quarter DTC result, reported with promotions tapering, will show whether the tariff-funded fix worked.
Sources
- Levi Strauss Q3 2026 Earnings Reveal Direct-to-Consumer Weakness — wwd.com
- Levi Strauss (LEVI) Q3 2026 earnings — CNBC
- Levi Strauss Reports Mixed Q3: EPS Beat, Revenues Miss — benzinga.com
- Levi Strauss Raises Earnings Outlook After Tariff Refunds Boost Results - WSJ — The Wall Street Journal
- Levi Strauss raises FY26 profit guidance but trims sales growth outlook (LEVI:NYSE) | Seeking Alpha — seekingalpha.com
