Retail Credit Research: LEVI's 2Q26: Pocketing the Beat, Spreads Still Snug

研报英文原文证据摘录

Retail Credit Research: LEVI's 2Q26: Pocketing the Beat, Spreads Still Snug

Update

July 9, 2026 02:59 PM GMT

Morgan Stanley & Co. LLCMRetail Credit Research | North America Jenna L Giannelli

Credit analyst

LEVI's 2Q26: Pocketing the Jenna.Giannelli@morganstanley.comRoopi Bhangu +1 212 761-4340

Credit Analyst

Roopi.Bhangu@morganstanley.com +1 212 761-1912

Beat, Spreads Still Snug

Strong quarter for LEVI, beating 2Q expectations for both sales

& EBITDA. The company also raised FY26 sales / EPS guidance

while maintaining the 12% adj. EBIT margin guide. We continue

to have a constructive fundamental view on LEVI, but bonds

screen as rich-to-fair, currently trading at IG levels with no room

for further compression.

Key Takeaways

Sales $1.562bn / adj. EBITDA $198mn beat cons. by ~3% / ~8%; organic sales

+5.7%.

FY26 rev / EPS guide were raised and 12% adj. EBIT margin was affirmed. We

model a 2H step up in margins as A&P normalizes and the company laps prior

year tariff headwinds.

While tariffs remain embedded in guidance, the guide excludes the potential for ~

$80mn in refunds.

LEVI's balance sheet is strong with liquidity ~$1.8bn and leverage ~1.1x. Strong

FCF is supportive of the credit despite shareholder friendly capital allocation.

Strength is more than priced in with LEVI '30s and '31s trading at 77bp and 101bp

OAS, respectively, well inside the BB index and in-line with IG levels.

Our take on the quarter (+): LEVI's 2Q was a clear beat versus both our and

consensus expectations at the top and bottom line. Sales were $1.562bn (+8.0%

reported / +5.7% organic), above $1.519bn cons. and our $1.504bn. Adjusted EBITDA

of $198.3mn (+16.9% YoY) also beat $183.9mn cons. and our $179mn estimate.

Gross margin expanded 10bp YoY to 62.7%, driven by lower product costs and