Levi Strauss & Co. (LEVI): F2Q26 Earnings Review: Broad-based growth drives 2Q beat and higher FY outlook, but SG&A leverage timing remains in focus

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Levi Strauss & Co. (LEVI): F2Q26 Earnings Review: Broad-based growth drives 2Q beat and higher FY outlook, but SG&A leverage timing remains in focus

ed by management’s QTD commentary and updated outlook.

However, we do believe LEVI’s market share gains in Signature will be closely

watched as LEVI gains market share in women’s and lifestyle at a large mass retailer

in 2H, which we believe could come at the expense of KTB (though the Lee brand is

more exposed to women’s in this channel, and is in the process of being divested).

Our take: This is a healthy quarter for LEVI, and we step away encouraged by the

company’s continued broad-based sales momentum. With sustainability of growth in

focus, we see LEVI’s 7% organic DTC growth in Europe as encouraging amidst a choppy

macro. Further, the company is increasingly diversifying into lifestyle categories,

evidenced by strength in summer categories like shorts (+11%), lightweight denim, and

linen. Signs of progress in China are also a bright spot. With guidance now increased and

management describing their updated outlook as prudent and conservative, we see

upside to EPS from the company’s tariff assumptions in F2H (and thus believe that the

company’s guide is a healthy reflection of underlying margin opportunity into F27

should tariff rates return to a higher level). That said, this is offset by a longer-dated path

to SG&A leverage, with LEVI not showing as strong of flow-through on the F2Q beat and

guiding for a weaker F3Q result vs. consensus as a result of a longer-dated path to

distribution center transition. While this is a result of a strategic business decision, we

believe that sustained growth and SG&A leverage execution amidst a backdrop of