SEC Filings

Levi's Tariff Refunds Drove 490 Basis Points Of Gross Margin Gain, 10-Q Says

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.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

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Levi's Tariff Refunds Drove 490 Basis Points Of Gross Margin Gain, 10-Q Says

Levi Strauss booked $78.6 million 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. 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

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