Executive Summary

Q2 2025 delivered broad-based strength: net revenues $1.446B (+6% reported, +9% organic), record gross margin 62.6% (+140 bps), adjusted EBIT margin 8.3% (+190 bps), and adjusted diluted EPS $0.22 (+37% YoY). Management raised FY25 revenue and EPS guidance despite tariff headwinds .
Direct-to-consumer (DTC) comprised 50% of revenue, up 10% organically; wholesale also grew 7% organically. Europe led with +15% organic growth; Americas +9%; Asia flat. The Levi’s brand grew 9% organically .
FY25 guidance changes: reported net revenue growth raised to 1–2% (from -1 to -2%), organic growth raised to 4.5–5.5%, adjusted EPS raised by $0.05 to $1.25–$1.30; gross margin expansion trimmed to +80 bps due to tariffs; adjusted EBIT margin maintained at 11.4–11.6% .
Key potential stock catalysts: guidance raise (top and bottom line), record gross margins, continued DTC profitability inflection, and a dividend increase to $0.14 for Q3 2025 .

What Went Well and What Went Wrong

What Went Well

Record gross margin 62.6% (+140 bps YoY) driven by lower product costs and favorable channel mix; adjusted EBIT margin up 190 bps to 8.3% with SG&A leverage .
DTC strength: +10% organic revenue growth; 13th consecutive quarter of positive global DTC comps; e-commerce +13% . “We delivered another strong quarter… clear evidence that our strategic agenda is gaining traction,” — Michelle Gass .
Europe outperformed: net revenues +15% organic; segment operating income +30% YoY; strong DTC and wholesale momentum as DC normalization benefited shipments . “Europe’s net revenues were up 15%… wholesale up 23%,” — Harmit Singh .

What Went Wrong

Asia flat organically in Q2; operating margin contracted due to proactive actions (reduced sales to less profitable partners, franchise rationalization) .
Adjusted SG&A still elevated at 54.4% of sales (albeit -50 bps YoY), with temporary distribution cost pressure from DC transitions; Q3 marketing timing shift will weigh near term margins .
Tariffs: net impact estimated at ~20 bps to FY gross margin (~40 bps in H2) and ~$0.02–$0.03 EPS headwind; mitigation includes pricing, promo optimization, vendor negotiations, diversification .

Financial Results

Core P&L trends (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Net Revenues ($USD Billions)	$1.840	$1.527	$1.446
Gross Margin %	61.3%	62.1%	62.6%
Operating Margin %	11.5%	12.5%	7.5%
Adjusted EBIT Margin %	13.4%	13.4%	8.3%
Diluted EPS – Continuing Ops (GAAP)	$0.46	$0.35	$0.20
Adjusted Diluted EPS	$0.50	$0.38	$0.22
Adjusted SG&A % of Sales	47.8%	48.7%	54.4%

Notes:

Q2 operating margin reflects higher restructuring and DC transition costs; YoY EBIT expansion stems from gross margin and SG&A leverage .

Q2 2025 actual vs prior year and consensus

Metric	Q2 2024	Q2 2025 Actual	Consensus (S&P Global)	Delta vs Consensus
Net Revenues ($USD Millions)	$1,358.8	$1,446.0	$1,369.7*	+$76.3
Adjusted Diluted EPS ($)	$0.16	$0.22	$0.1347*	+$0.0853
EBITDA ($USD Millions)	N/A	$169.6	$127.2*	+$42.4

Values with asterisks retrieved from S&P Global.

Segment breakdown (Net Revenues, $USD Millions)

Segment	Q2 2024	Q2 2025	YoY Change
Americas	$712	$748	+5% reported; +9% organic
Europe	$354	$403	+14% reported; +15% organic
Asia	$260	$258	-1% reported; flat organic
Beyond Yoga	$33	$37	+12% reported/organic

Segment operating income (Operating Income, $USD Millions)

Segment	Q2 2024	Q2 2025	YoY Change
Americas	$126	$153	+21%
Europe	$53	$69	+30%
Asia	$34	$30	-13%
Beyond Yoga	-$3	-$4	N/M

KPIs (Q2 2025)

KPI	Value
DTC share of revenue	50%
DTC organic revenue growth	+10%
Wholesale organic revenue growth	+7%
E-commerce growth (reported/organic)	+13% / +13%
Levi’s brand organic growth	+9%
Women’s growth (global, organic)	+14%
Tops growth (global)	+16%
International organic growth	+10%
DTC comps	13th consecutive positive quarter
Adjusted net income ($USD Millions)	$88.5

Non-GAAP reconciliations provided in the 8‑K; Q2 restructuring charges totaled $6.8M (Project Fuel) .

Guidance Changes

Metric	Period	Previous Guidance (Q1 2025)	Current Guidance (Q2 2025)	Change
Reported Net Revenue Growth	FY 2025	(-1%) to (-2%)	1% to 2%	Raised
Organic Net Revenue Growth	FY 2025	3.5% to 4.5%	4.5% to 5.5%	Raised
Gross Margin (YoY expansion)	FY 2025	+100 bps (to ~61.6%)	+80 bps (20 bps tariff impact)	Lowered (tariffs)
Adjusted EBIT Margin	FY 2025	11.4% to 11.6%	11.4% to 11.6%	Maintained
Tax Rate	FY 2025	~23%	~23%	Maintained
Adjusted Diluted EPS	FY 2025	$1.20–$1.25	$1.25–$1.30	Raised by $0.05
Dividend per share	Q3 2025	$0.13 (Q1 declaration)	$0.14 (declared for Q3)	Raised

Assumptions include U.S. tariffs at 30% (China) and 10% (Rest-of-World) for the remainder of FY25 .

Earnings Call Themes & Trends

Topic	Q4 2024 (Q-2)	Q1 2025 (Q-1)	Q2 2025 (Current)	Trend
DTC profitability	Improving; record GM; DTC +14% organic	DTC +12% organic; SG&A leverage	DTC EBIT margins +~300 bps Q2 and +~400 bps YTD; e-comm profitable	Strengthening
Europe momentum	Inflecting to growth	Mixed; Europe -5% reported, +3% organic	+15% organic; wholesale up 23% post DC normalization	Strong positive
Product mix (women/tops)	Brand heat; Beyoncé campaign	Levi’s brand +8% organic; women/tops growth noted	Women +14%; tops +16%; lifestyle expansion	Accelerating
Supply chain/DC	Project Fuel savings; DC upgrades underway	Secured inventory for Q2; ongoing restructuring	Temporary higher distribution costs; DC consolidation completes by year-end	Near-term cost, long-term efficiency
Tariffs	Not yet in FY24	Guidance excluded tariff impact; monitoring	Assumes 30%/10%; net ~20 bps GM headwind with mitigation	Managed headwind
Marketing/collabs	Beyoncé campaign	Continued brand investments	Nike collab launch; men’s campaign planned for fall	Elevated brand heat

Management Commentary

“We’re entering the second half of 2025 from a position of strength… transform into a denim lifestyle brand and best-in-class DTC retailer becomes our reality.” — Michelle Gass, President & CEO .
“We are fundamentally becoming a company with a higher growth rate, higher margin profile, stronger cash flows and higher returns on invested capital.” — Harmit Singh, CFO .
“Gross margin for quarter two was a record 62.6%… driven by lower product costs and favorable channel mix.” — Harmit Singh .
“Our tops business grew 16% this quarter… our evolution into denim lifestyle is gaining momentum.” — Michelle Gass .

Q&A Highlights

Wholesale trajectory: order books positive; guidance prudent, expecting flat-to-slightly positive FY wholesale; Q3 lean-in to fill holiday flows .
Margin drivers and durability: DTC share, women’s mix, less promotion, assortment productivity underpin structural gross margin expansion; “we’re not done yet” on margins .
DTC economics: DTC EBIT margin now in the high teens; e-commerce turned profitable; revenue per square foot and cost discipline (labor, new build costs) driving improvement .
Tariff planning: assuming 30% (China)/10% (RoW) in H2; net impact ~$25–$30M and ~20 bps to FY GM; mitigation via pricing, promo optimization, vendor negotiations, diversification .
Near-term guide cadence: Q3 adjusted EBIT margin (10.8–11.2%) below last year due to marketing timing shift to Q3 and distribution expenses during DC transition .

Estimates Context

Q2 results beat S&P Global consensus on revenue, EPS, and EBITDA (see table above). Management raised FY25 EPS guidance, implying potential upward estimate revisions in H2 despite tariff headwinds; Q3 guide incorporates ~$0.01 net tariff impact and higher tax rate vs prior year .

Values retrieved from S&P Global.

Key Takeaways for Investors

Strong beat vs consensus and robust gross margin signal durable earnings power; focus on DTC-first strategy and women/tops mix supports margin resilience .
Guidance raise (revenue and EPS) despite tariffs underscores confidence; expect H2 cadence with Q3 marketing shift and DC costs, then normalization by year-end .
Europe is a standout growth engine with reinstated wholesale momentum post DC transition; medium-term runway remains attractive .
DTC profitability inflection (store comps, revenue/sq ft, e-comm profitability) is a key structural driver toward long-term 15% operating margin ambition .
Tariff risk is being actively mitigated; H2 margin headwind (~40 bps) appears manageable within the elevated gross margin framework .
Product and brand heat (Nike collab, Beyoncé campaign) should sustain AUR and full-price sell-through, supporting revenue quality in H2 .
Capital returns: dividend increased to $0.14 for Q3 and intent to deploy at least $100M of Dockers sale proceeds for buybacks, balanced with strong liquidity ($654M cash) .

LEVI STRAUSS & CO (LEVI)·Q2 2025 Earnings Summary