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# Levi's Tariff Refunds Drove 490 Basis Points Of Gross Margin Gain, 10-Q Says
- URL: https://www.bullished.co/levis-tariff-refunds-drove-490-basis-points-of-gross-margin-gain-10-q-says-5612184f/
- Published: 2026-10-07T21:10:52.000Z
- Updated: 2026-10-07T21:10:52.000Z
- Description: A $78.6 million cut to cost of goods sold carried the quarter's margin gain, while store traffic slowed and Beyond Yoga's valuation cushion stayed thin.
- Author: Matteo Parrino
- Tags: SEC Filings, LEVI, Industry: Consumer Discretionary

Levi Strauss booked [$78.6 million](https://www.sec.gov/Archives/edgar/data/0000094845/000009484526000047/lvis-20260830.htm?ref=bullished.co) of refunds on tariffs the Supreme Court invalidated, and its 10-Q says that benefit alone drove 490 basis points (4.9 percentage points) of gross margin expansion in the quarter. The filing, dated Wednesday, ties much of the profitability jump to a court ruling rather than to selling more denim.

## What the 10-Q says

The refunds, tied to the IEEPA tariffs, were recorded as a reduction to cost of goods sold. Cheaper product costs added to the gross margin improvement, while currency moves took back roughly 70 basis points.

Interest income of $4.7 million on the refunds themselves sits in other income, on top of the $78.6 million. Over nine months, operating margin reached 11.1% versus 10.3% a year earlier, with the refunds accounting for 170 basis points of that gain.

The prior quarter looked different. Levi had paid about $80 million in tariffs and could not call further recovery probable, according to the [earlier 10-Q](https://www.sec.gov/Archives/edgar/data/0000094845/000009484526000037/lvis-20260531.htm?ref=bullished.co). The new filing says the company "continues to assess loss recovery on tariff refunds under future phases."

## Cash, traffic and Beyond Yoga

Operating cash flow rose to $585.2 million from $262.8 million, driven by receivable collections and lower inventory spending. Payables added $83.3 million against a $44.6 million drain a year earlier. Supplier-finance obligations inside payables rose to $175.4 million from $136.5 million. Nine-month operating cash flow also includes $57.1 million of tariff refunds actually received.

Slower traffic cut revenue at company-operated stores, and selling expenses took a bigger share of revenue as a result, the filing says. Wholesale revenue rose on price increases.

Beyond Yoga's valuation headroom is under 10% in both 2026 and 2025\. Its quarterly operating loss grew to $5.3 million from $4.8 million, and the filing says higher SG&A caused the increase.

## What it changes

The one-time refunds carry more of the quarter than they appear to. Levi has been reshaping around direct-to-consumer sales and shedding Dockers, whose final closing came in February 2026, and management has said the direct-to-consumer arm fell short of internal expectations.

At Wednesday's close, shares were $19.51, down 4.97%, for a market value of $7.9 billion.

## What to watch

The fourth-quarter report will show whether Levi books more refunds under later phases and whether direct-to-consumer delivers the mid-single-digit growth management has forecast.

The filing's own wording leaves further recovery as something the company is still assessing, not a booked number.

### Sources

- [10-Q Filing — Levi Strauss (LEVI)](https://www.sec.gov/Archives/edgar/data/0000094845/000009484526000047/lvis-20260830.htm?ref=bullished.co) — SEC EDGAR
- [10-Q Filing — Levi Strauss (LEVI), Q2 2026 filed 2026-07-08 (comparison basis)](https://www.sec.gov/Archives/edgar/data/0000094845/000009484526000037/lvis-20260531.htm?ref=bullished.co) — SEC EDGAR
- [Levi Strauss (LEVI) Q3 2026 earnings](https://www.cnbc.com/2026/10/07/levi-strauss-levi-q3-2026-earnings.html?ref=bullished.co) — CNBC
- [Levi Strauss Non-GAAP EPS of $0.48 beats by $0.12, revenue of $1.61B misses by $10M (LEVI:NYSE)](https://seekingalpha.com/news/4651161-levi-strauss-non-gaap-eps-of-0%5F48-beats-by-0%5F12-revenue-of-1%5F61b-misses-by-10m?ref=bullished.co) — seekingalpha.com
- [US markets: Levi Strauss shares in focus ahead of Q3 earnings | Stock Market News](https://www.livemint.com/market/stock-market-news/us-markets-levi-strauss-shares-in-focus-ahead-of-q3-earnings-11791377902445.html?ref=bullished.co) — livemint.com
- [Levi Strauss Raises FY2026 Adj EPS Guidance f...](https://www.benzinga.com/news/26/10/62233066/levi-strauss-raises-fy2026-adj-eps-guidance-1-46-1-52-1-54-1-56-vs-1-54-est-narrows-fy2026-sales-gui?ref=bullished.co) — benzinga.com
- [How To Earn $500 A Month From Levi Strauss Stock Ahead Of Q3 Earnings](https://www.benzinga.com/trading-ideas/dividends/26/10/62186569/how-to-earn-500-a-month-from-levi-strauss-stock-ahead-of-q3-earnings-2?ref=bullished.co) — benzinga.com