8-K: Levi Strauss Reports Strong FY25, Guides Mid-Single Digit FY26 Growth

Levi Strauss & Co. announced robust fourth-quarter and full-year 2025 results, driven by DTC strength and strategic focus, alongside optimistic mid-single-digit revenue growth guidance for fiscal year 2026.

Summary

• Fourth quarter 2025 net revenues were $1.8 billion, increasing 1% on a reported basis and 5% on an organic basis compared to Q4 2024.
• Full fiscal year 2025 net revenues reached $6.3 billion, up 4% reported and 7% on an organic basis versus FY 2024.
• Direct-to-Consumer (DTC) net revenues increased 8% on a reported basis and 10% on an organic basis in Q4 2025, comprising 49% of total net revenues.
• Beyond Yoga brand net revenues grew 37% reported and 45% organic in Q4 2025.
• Diluted earnings per share from continuing operations were $0.40 for Q4 2025 (Adjusted $0.41) and $1.26 for FY 2025 (Adjusted $1.34).
• Adjusted EBIT margin improved to 11.4% for FY 2025, up from 10.7% in FY 2024, marking the third consecutive year of expansion.
• The company returned $363 million in capital to shareholders in FY 2025, a 26% increase over the prior year, including $213 million in dividends and $150 million in share repurchases.
• A new $200 million Accelerated Share Repurchase (ASR) program has been announced.
• Fiscal year 2026 guidance includes reported net revenues growth of 5% to 6%, organic net revenues growth of 4% to 5%, flat gross margin, and adjusted EBIT margin expanding to 11.8% to 12%.
• Adjusted diluted EPS for FY 2026 is projected to be $1.40 to $1.46, factoring in an approximate $0.04 headwind from a higher tax rate.

Sentiment

Score: 8

Explanation: The filing presents strong full-year financial performance, particularly in organic revenue growth and profitability, driven by successful strategic initiatives like DTC expansion. The positive FY2026 guidance and significant capital return to shareholders, including a new ASR program, indicate robust confidence in future prospects, despite some Q4 headwinds and ongoing macroeconomic risks.

Positives

• Strong organic net revenue growth of 5% in Q4 2025 and 7% for the full fiscal year 2025.
• Significant growth in the Direct-to-Consumer (DTC) channel, with net revenues increasing 8% reported and 10% organic in Q4 2025, now representing 49% of total net revenues.
• E-commerce net revenues experienced robust growth, up 19% reported and 22% organic in Q4 2025.
• The Beyond Yoga brand demonstrated exceptional performance, with net revenues increasing 37% reported and 45% organic in Q4 2025.
• Adjusted EBIT margin improved for the third consecutive year, reaching 11.4% in FY 2025, up from 10.7% in FY 2024.
• Strong net cash from operating cash flows of $530 million and Adjusted Free Cash Flow generation of $308 million for FY 2025.
• Increased capital return to shareholders, totaling $363 million in FY 2025 (up 26% year-over-year), including a 7% increase in the annual dividend to $0.54 per share.
• Announcement of a new $200 million Accelerated Share Repurchase (ASR) program, reflecting confidence in future performance.
• Positive fiscal year 2026 guidance projecting mid-single-digit topline growth and further adjusted EBIT margin expansion to 11.8% to 12%.

Negatives

• Fourth quarter 2025 reported net revenues growth of 1% was lower than organic growth due to foreign exchange impacts, divested businesses, and the 53rd week comparison.
• Americas net revenues decreased 4% on a reported basis in Q4 2025, with the U.S. market decreasing 7% on a reported basis.
• Wholesale net revenues decreased 5% on a reported basis in Q4 2025.
• Q4 2025 Adjusted EBIT margin declined to 12.1% from 13.9% in Q4 2024, primarily attributed to the impact of lapping the 53rd week and tariffs.
• Q4 2025 Gross margin decreased to 60.8% from 61.8% in Q4 2024, mainly due to tariffs, partially offset by initial price increases.
• Net income from continuing operations for Q4 2025 decreased to $160 million from $180 million in Q4 2024.
• Adjusted diluted earnings per share for Q4 2025 decreased to $0.41 from $0.49 in Q4 2024.
• Fiscal year 2026 guidance includes an approximate $0.04 headwind to Adjusted diluted EPS due to a higher projected tax rate of approximately 23% (2 points higher than prior year).
• Total inventories increased 9% on a dollar basis as of November 30, 2025, compared to Q4 2024.

Risks

• Potential significant worsening of macro-economic pressures on the consumer.
• Ongoing inflationary pressures impacting costs and consumer spending.
• Risk of supply chain disruptions affecting operations and product availability.
• Impact of potential tariffs, with guidance assuming U.S. tariffs on imports from China remain at 30% and Rest-of-World at 20%.
• Adverse effects from foreign currency fluctuations.
• Other unknown or unpredictable factors that could materially affect future results, performance, or achievements, as detailed in the company's Annual Report on Form 10-K for fiscal 2025.

Future Outlook

Levi Strauss & Co. projects reported net revenues growth of 5% to 6% and organic net revenues growth of 4% to 5% for fiscal year 2026. Gross margin is expected to be flat to prior year, while Adjusted EBIT margin is anticipated to expand to 11.8% to 12%. Adjusted diluted EPS is guided to be $1.40 to $1.46, including an approximate $0.04 headwind from a higher tax rate of about 23%. This outlook assumes no significant worsening of macro-economic pressures on the consumer, inflationary pressures, supply chain disruptions, potential tariffs, or currency fluctuations.

Management Comments

• "Over the past few years, we've taken bold steps toward becoming a DTC-first, head-to-toe denim lifestyle brand. We have narrowed our focus, improved operational execution and built greater agility across the organization. As a result, we've elevated the Levis brand and delivered faster growth and higher profitability, as reflected by our Q4 and full year 2025 results. While we still have important work ahead, the company is at an inflection point—emerging as a stronger, more resilient global business ready to define the next chapter of LS&Co." Michelle Gass, President and CEO.
• "We are sustaining our momentum, delivering 5% organic growth in the fourth quarter on top of an 8% increase in the prior year. Our success in denim lifestyle has enabled us to expand our addressable market, positioning us for mid-single digit growth in 2026 and beyond. Our disciplined approach to converting growth into profitability has improved adjusted EBIT margin in 2025 for the third year in a row, and we are on track to expand margins further as we strive toward 15%. Our confidence in this trajectory is reflected in a new $200 million ASR program." Harmit Singh, Chief Financial and Growth Officer.

Industry Context

The company's strategic shift towards a "DTC-first, head-to-toe denim lifestyle brand" aligns with broader apparel industry trends emphasizing direct consumer engagement, brand experience, and diversification beyond core products. The strong performance of its DTC channel and the Beyond Yoga brand indicates successful adaptation to evolving consumer preferences for convenience, brand loyalty, and activewear. The divestiture of Dockers also reflects a focus on core, higher-growth segments, a common strategy for established brands seeking to streamline operations and enhance profitability in a competitive market.

Legal Proceedings

• Restructuring related charges for FY 2025 included legal settlements of $3.5 million, offset by an insurance recovery of $1.5 million.

Stakeholder Impact

• Shareholders: Positive impact due to strong financial performance, increased dividends ($0.14 per share declared, $0.54 annual dividend up 7%), significant share repurchases ($150 million in FY2025, new $200 million ASR), and a positive future outlook.
• Employees: Impacted by restructuring charges related to Project Fuel, which included severance and other post-employment benefit charges, and distribution center transition costs.
• Customers: Potential benefits from the company's strategic focus on a "DTC-first, head-to-toe denim lifestyle brand," suggesting enhanced product offerings and direct engagement.
• Suppliers: Potential impact from supply chain disruptions, which are mentioned as a risk factor.
• Creditors: Strong cash flow from operations ($530 million) and total liquidity ($1.7 billion) indicate a healthy financial position to meet obligations.

Next Steps

• Completion of the sale of remaining Dockers operations on or around February 27, 2026.
• Execution of the $200 million accelerated share repurchase agreement.
• Continued focus on becoming a DTC-first, head-to-toe denim lifestyle brand.
• Striving towards 15% adjusted EBIT margin.

Key Dates

Recommendation

The company demonstrates strong underlying organic growth, particularly in its strategic DTC channel and the Beyond Yoga brand, indicating successful execution of its "DTC-first, head-to-toe denim lifestyle brand" strategy. Full-year 2025 results show significant improvements in revenue, profitability, and EPS, with a positive outlook for 2026 including continued topline growth and margin expansion. The substantial capital return to shareholders through increased dividends and a new $200 million ASR program signals strong management confidence and commitment to shareholder value. While Q4 faced some headwinds from tariffs and a 53rd week comparison, the overall trajectory is positive, making it an attractive investment.

Keywords

Levi Strauss, LEVI, Q4 2025 Earnings, FY 2025 Results, 2026 Guidance, DTC Growth, Denim Lifestyle, Beyond Yoga, Share Repurchase, Dividends, Financial Results, Apparel, Jeanswear, SEC Filing, 8-K