Q4 2024 Levi Strauss & Co Earnings Call

January 29, 2025

All parties will be in a listen only mode until the question and answer session at which time instructions will follow.

This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company.

This conference call is being broadcast over the Internet and a replay of the webcast will be accessible for one quarter on the Companys website Levi Strauss Dot com.

Speaker Change: I would now like to turn the call over to Idaho Orphan Vice President of Investor Relations at Levi Strauss <unk> company.

Thank you for joining us on the call today to discuss the results for our fourth quarter and fiscal year and joining me on today's call are Michele <unk>, our president and CEO and Hermite Singh, our chief financial and growth Officer, We have posted complete Q4 and fiscal year end results in our earnings release on the IR section of our website investors Dot Levi Strauss dot.

Speaker Change: Thank you for joining us on the call today to discuss the results for our fourth quarter and fiscal year and joining me on today's call are Michele gosh, our president and CEO and Harmeet, Zhang our chief financial and growth Officer, We have posted complete Q4 and fiscal year end results in our earnings release on the IR section of our website at investors Dot Levi Strauss Dot com.

Speaker Change: Com.

Speaker Change: The link to the webcast of today's conference call can also be found on our site.

Speaker Change: I'd like to remind you we will be making forward looking statements on this call, which involve risks and uncertainties actual results could differ materially from those contemplated contemplated by our forward looking statements.

Speaker Change: Please review our filings with the SEC in particular, the risk factors section of our Form 10-K for the year ended December one 2024 for the factors that could cause our results to differ also note that the forward looking statements on this call are based on information available to us as of today and we assume no obligation to update any of these statements.

Tom.

Speaker Change: Link to the webcast of today's conference call can also be found on our site, we'd like to remind you we will be making forward looking statements on this call, which involve risks and uncertainties.

Speaker Change: Actual results could differ materially from those contemplated contemplated by our forward looking statements.

During this call we will discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results reconciliations of our non-GAAP measures to their most comparable GAAP measure are included in today's press release reconciliation of non-GAAP forward looking information to the corresponding GAAP measures however cannot be provided.

Speaker Change: Also note that the forward looking statements on this call are based on information available to us as of today and we assume no obligation to update any of these statements.

Speaker Change: Without unreasonable efforts due to the challenge and quantifying various items, including but not limited to the effects of foreign currency fluctuations taxes in any future restructuring restructuring related severance and other charges.

Speaker Change: During this call we will discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results reconciliations of our non-GAAP measures to their most comparable GAAP measure are included in today's press release reconciliation of non-GAAP forward looking information to the corresponding GAAP measures however cannot be provided.

Speaker Change: This call is being webcast on our IR website and a replay of this call will be available on the website. Shortly finally, please note that Michelle and her meet will be referencing organic net revenues unless otherwise noted as described in our press release and 10-K organic net revenues exclude the impacts of foreign exchange rates divested business.

Speaker Change: Acquisitions, and any 50 <unk> week from the change in reported net revenue.

Speaker Change: Today's call is scheduled for one hour. So please limit yourself to one question at a time to give others the opportunity to have their questions addressed and now I'd like to turn over the call to Michelle.

Michelle: Thank you and welcome everyone to today's call you'll hear from US today that we delivered strong Q4 results, including through the holiday season that our strategies are driving momentum in the business and that we are entering 2025 from a position of strength.

Speaker Change: Acquisitions, and any 50 <unk> week from the change in reported net revenues.

Michelle: In 2024, we took several bold steps to position Allison co for sustainable profitable long term growth.

Michelle: We sharpened our focus on our core Levi's brand by exiting denizen announcing the exit of footwear and preparing for the sale of dockers.

Michelle: We accelerated our DTC transformation generating high single digit comp growth in 2024, while also expanding our store base globally.

Michelle: In 2024, we took several bold steps to position Allison co for sustainable profitable long term growth, we sharpened our focus on our core Levi's brand by exiting denizen announcing the exited footwear and preparing for the sale of Dockers We act.

Michelle: We stabilized wholesale channel trends driving improvement and performance through the year.

We advance our evolution to become a true lifestyle apparel brand by rolling out a robust product pipeline.

Michelle: Celebrated our DTC transformation generating high single digit comp growth in 2024, while also expanding our store base globally.

Michelle: We launched our breakthrough campaign with global icon beyond say reaffirming Levi's place at the center of culture, which is driving demand across our business, especially in womens.

Michelle: We stabilized wholesale channel trends driving improvement and performance through the year.

And for the year, we delivered solid mid single digit growth for the Levi's brand in the U S and internationally.

Michelle: We advance our evolution to become a true lifestyle apparel brand by rolling out a robust product pipeline.

Michelle: We have done all of this while fundamentally changing the way we work as part of our hard pivot towards becoming a best in class Omnichannel retailer, we have right sized our organization expanded our product pipeline and our streamlining how we work, including our go to market.

Michelle: We launched our breakthrough campaign with global icon beyond say reaffirming Levi's placed at the center of culture, which is driving demand across our business, especially in women.

Michelle: And for the year, we delivered solid mid single digit growth for the Levi's brand in the U S and internationally.

Michelle: As we look to 2025 this transformation will continue enabling us to operate with greater speed improved agility and more responsiveness to consumer demand.

Michelle: While we are just one year into this exciting next chapter for the company our fourth quarter performance demonstrates how this transformation is accelerating both the topline and bottom line in Q4 net revenues increased 12% on a reported basis.

Michelle: As we look to 2025 this transformation will continue enabling us to operate with greater speed improved agility and more responsiveness to consumer demand.

Michelle: On an organic basis, excluding the non comparable items in the quarter of the exit of the denizen business and footwear the impact of the 50, <unk> week and FX headwinds net revenue grew 8%.

Michelle: While we're just one year into this exciting next chapter for the company our fourth quarter performance demonstrates how this transformation is accelerating both the topline and bottom line in Q4 net revenues increased 12% on a reported basis.

Michelle: Our performance accelerated throughout 2024, resulting in organic net revenue growth of 3% for the full year.

The continued strength of our brand is reflected in the all time record gross margin of 60%, which helped drive a 120 basis points of adjusted EBIT margin expansion translating to a double digit increase in earnings per share to $1 25. This year.

Michelle: Our performance accelerated throughout 2024, resulting in organic net revenue growth of 3% for the full year.

Michelle: In the fourth quarter, we saw strong growth across every aspect of our business.

Michelle: The continued strength of our brand is reflected in the all time record gross margin of 60%, which helped drive a 120 basis points of adjusted EBIT margin expansion translating to a double digit increase in earnings per share to $1 25. This year.

Michelle: As a reminder, all net revenue numbers will be on an organic basis.

Michelle: The momentum we saw in Q4 continued through holiday.

Michelle: As we elevate our capability as a best in class retailer, we were extremely focused on winning the holiday season, we put a number of programs in place to ensure we have the right strategies to delight, our fans and equip our stylists to deliver outstanding experiences. During this critical time.

Michelle: In the fourth quarter, we saw strong growth across every aspect of our business.

Michelle: As a reminder, all net revenue numbers will be on an organic basis.

Michelle: The momentum we saw in Q4 continued through holiday.

Michelle: We had a more comprehensive holiday assortment, we were well stocked and replenished we delivered traffic driving marketing in store and online and we staff to service consumer demand.

Michelle: This led to a robust 8% growth during the November December holiday season.

Michelle: Marking our highest revenue for this period in at least a decade.

Michelle: We had a more comprehensive holiday assortment, we were well stocked and replenished we delivered traffic driving marketing in store and online and we staff to service consumer demand.

Michelle: Across the board this was a strong quarter driven by consistent execution of our strategic priorities.

Michelle: Which as a reminder, our being brand led DTC first empowering our portfolio.

Michelle: This led to a robust 8% growth during the November December holiday season.

Michelle: First we will walk through the progress made against our brand led strategy, which centers around how we are amplifying the power of the Levi's brand through an innovative and fresh product pipeline and culturally relevant marketing.

Michelle: Marking our highest revenue for this period and at least a decade.

Michelle: Across the board this was a strong quarter driven by consistent execution of our strategic priorities.

Michelle: Which as a reminder, our being brand led DTC first empowering our portfolio.

Michelle: For the quarter, the Levi's brand was up 8% driven by strong growth across categories and genders.

Michelle: Let's start with the women's business the momentum we have seen in our Levi's women's business. This year continued into Q4 growing 12% and delivering nearly $2 billion in sales for the full year.

Michelle: For the quarter, the Levi's brand was up 8% driven by strong growth across categories and genders.

Michelle: This was driven by continued share gains in the U S. Now firmly placing levi's as the number one women's denim brand on a 12 month basis, a significant milestone for our company.

Michelle: Let's start with the women's business the momentum we have seen in our Levi's women's business. This year continued into Q4.

Michelle: And our Levi's men's business accelerated from approximately flat through Q3 to a mid single digit growth in Q4, as we introduced more newness to our assortment, especially loose fits and as the wholesale business strengthened.

Michelle: <unk>, 12% and delivering nearly $2 billion in sales for the full year.

This was driven by continued share gains in the U S. Now firmly placing levi's as the number one women's denim brand on a 12 month basis, a significant milestone for our company.

Michelle: Our global marketing initiatives continue to help drive demand across all channels of our business before our last call. We launched the first chapter of re imaging our campaign with beyond say.

Michelle: This partnership is having a significant impact on brand affinity within our target consumer demographic, while supporting our focus on growing our women's business and owning denim lifestyle.

Michelle: Our global marketing initiatives continue to help drive demand across all channels of our business.

Michelle: We're excited to launch the additional chapters of re imagine throughout 2025 with the next iteration coming soon.

Michelle: Before our last call we launched the first chapter of re imagine our campaign with beyond say.

Michelle: A year ago I shared my commitment to elevate our denim authority and evolve into a full lifestyle apparel brand through an expanded product pipeline and introduction of new innovative platforms.

Michelle: We're excited to launch the additional chapters of re imagine throughout 2025 with the next iteration coming soon.

Michelle: I am pleased to share it's working in 2024, we delivered a significantly expanded product assortment with newness across categories fit and fabric.

Michelle: This innovation is fueling growth with consumers more willing to pay full price.

Michelle: And we continue to see strong performance in our core offerings as well such as in our most coveted icon the 501.

Michelle: I am pleased to share it's working in 2024, we delivered a significantly expanded product assortment with newness across categories fit and fabric.

Michelle: In the quarter, our Levi's bottoms business was up 8% driven by strength in both mens and womens.

Michelle: This innovation is fueling growth with consumers more willing to pay full price.

Michelle: We continued to see outperformance and loosened baggy fits driven by new fit launches like the XL and rib cage wildlife for her and the loose 568, and relaxed 555 fits for him.

Michelle: And we continue to see strong performance in our core offerings as well such as in our most coveted icon the 501.

Michelle: In the quarter, our Levi's bottoms business was up 8% driven by strength in both mens and womens we continued to see outperformance and losing bag effects driven by new fit launches like the XL and rib cage wildlife for her and the loose 568 in relapsed <unk> five five fits.

Michelle: This year, we made significant progress expanding our authority as a head to toe denim lifestyle brand.

Michelle: As the authentic purveyor of Western wear we are continuing to drive the broader trend across genders with our iconic denim western tops shorts jumpsuits and dresses.

Michelle: We have also seen a strong response to the denim outerwear offerings, which we launched in time for the holidays with styles like the Super Pepper in Spain trench.

Michelle: For him.

Michelle: This year, we made significant progress expanding our authority as a head to toe denim lifestyle brand as.

Michelle: As the authentic purveyor of Western wear we are continuing to drive the broader trend across genders with our iconic denim western tops shorts jumpsuits and dresses.

Michelle: And we continue to fuel growth in one of our newer categories dresses and skirts with relevant fashion newness and expanded assortments.

Michelle: With respect to expanded lifestyle categories for men, we continued to see strength in men's non denim bottoms fueled by our Xx Chino series as well as our tech platform.

We have also seen a strong response to the denim outerwear offerings, which we launched in time for the holidays with styles like the Super copper and stayed trench.

Michelle: And we continue to fuel growth in one of our newer categories dresses and skirts with relevant fashion newness and expanded assortments.

Michelle: Given the strong consumer response, we will continue to expand that platform in the coming year with new elevated offerings.

Michelle: Over the last year the product team has been hard at work to deliver an end to end reset of our levis tops business and we're seeing encouraging results with this business up 8% in Q4.

Michelle: With respect to expanded lifestyle categories for men, we continued to see strength in mens non denim bottoms fueled by our Xx Chino series as well as our platform.

Given the strong consumer response, we will continue to expand that platform in the coming year with new elevated offerings.

Michelle: Growth was fueled by elevated essentials, blouses, and button downs, which we expect to sustain as consumers begin to see us as a destination for these categories.

Michelle: Over the last year the product team has been hard at work to deliver an end to end reset of our revised top business and we're seeing encouraging results with this business up 8% in Q4 growth was fueled by elevated essentials, blouses, and button down, which we expect to sustain as consumers begin to see us.

Michelle: Looking to 2025, we will lead the trend with another exciting pipeline of newness and innovation.

Michelle: This spring, we will assert our denim leadership through the introduction of our latest innovation Linden plus denim, while building off our momentum in loose and baggy with additional launches to come.

Michelle: As a destination for these categories.

Michelle: This will be complemented with an expanded assortment of lifestyle categories, such as tops dresses and outerwear all rooted in denim.

Michelle: Looking to 2025, we will lead the trend with another exciting pipeline of newness and innovation.

Michelle: Now shifting to our strategy to be DTC first.

Michelle: Our global direct to consumer business delivered another quarter of double digit growth up 14% and posting its 11th consecutive quarter of positive comps.

This will be complemented with an expanded assortment of lifestyle categories, such as tops dresses and outerwear all rooted in denim.

Michelle: Over the past year, we have been laser focused on our retail fundamentals, which translates to an improved consumer experience.

Michelle: Now shifting to our strategy to be DTC first.

Michelle: Along with broader assortment and better in stocks are enhanced retail execution is driving increased conversion and a mid single digit increase in AUR.

Michelle: Our global direct to consumer business delivered another quarter of double digit growth up 14% and posting its 11th consecutive quarter of positive comps.

Michelle: We are also seeing strong incremental performance from our new stores in.

Michelle: Over the past year, we have been laser focused on our retail fundamentals, which translates to an improved consumer experience.

Michelle: In Q4, we opened 33 net new stores, including one in London's iconic Knightsbridge neighborhood, and two large format stores in India, and Malaysia, as we continue to expand our DTC presence in Asia.

Michelle: Along with broader assortment and better in stocks are enhanced retail execution is driving increased conversion and a mid single digit increase in AUR.

Michelle: Our ecommerce growth was again very strong up 14% and importantly talk further margin expansion in 2024.

Michelle: We are also seeing strong incremental performance from our new stores.

For the full year global DTC was up 11% approaching $3 billion. This represents a 47% of total global net revenues four points ahead of last year.

Michelle: Our ecommerce growth was again very strong up 14% and importantly talk further margin expansion in 2024.

Michelle: Our global wholesale business continues to be a critical part of our business and inflected to growth this quarter up 3% exceeding our expectations driven by strong performance in the U S and growth in Asia.

Michelle: For the full year global DTC was up 11% approaching $3 billion. This represents a 47% of total global net revenues four points ahead of last year.

Michelle: Within U S wholesale to Levi's brands were up 4% retailers are responding to the significant amount of newness across our assortment, which is driving an acceleration in the men's business.

Michelle: And while we're encouraged by our performance in the quarter. We continue to approach this channel cautiously.

Michelle: As expected signature our value brand returned to growth in the quarter driven by the success of some of our corporate like the signature men's athletic fit.

Michelle: Within U S wholesale to Levi's brands were up 4% retailers are responding to a significant amount of newness across our assortment, which is driving an acceleration in the men's business.

Michelle: Now turning to our third strategy powering the portfolio in Q4, our international business grew 9% led by strong performance in our top four international markets, Mexico, France, the UK and India.

Michelle: While we're encouraged by our performance in the quarter, we continue to approach this channel cautiously.

Michelle: As expected signature our value brand returned to growth in the quarter driven by the success of some of our corporate like decisions from men's athletic fit.

Michelle: Dockers was up 5% in the quarter, reflecting broad based growth across channels and geographies.

Michelle: Profitability exceeded prior year, driven by higher sales volume and gross margin expansion.

Michelle: Beyond yoga was up 4% on top of 19% growth in the prior year and was up double digits for the full year our.

Michelle: Our broadened product assortment is gaining traction, especially in fleece and outerwear were also excited to open our first east coast store in Connecticut later this year.

Michelle: <unk> was up 5% in the quarter, reflecting broad based growth across channels and geographies profitability exceeded prior year, driven by higher sales volume and gross margin expansion.

Michelle: As we look to the year ahead, we are encouraged by the momentum that our strategic priorities are driving across the business.

Michelle: Yoga was up 4% on top of 19% growth in the prior year and was up double digits for the full year.

We are focused on accelerating our performance on both the top and bottom line by.

Michelle: Our broadened product assortment is gaining traction, especially in fleece and outerwear were also excited to open our first east coast store in Connecticut later this year.

Michelle: First continue to drive Levi's growth across genders and categories and create powerful brand moment, we will do this by broadening our brand relevant lifestyle assortment, while maintaining our leadership in denim bottoms in our key markets.

Michelle: As we look to the year ahead, we are encouraged by the momentum that our strategic priorities are driving across the business.

Michelle: We are focused on accelerating our performance on both the top and bottom line by <unk>.

Michelle: Second further accelerate our direct to consumer channels, while reinvigorating our wholesale business, we will continue to hone our retail fundamentals deliver relevant and innovative product assortments and drive demand through engaging marketing.

Michelle: And third accelerate growth across our geographic portfolio by generating profitable growth in our largest regions North America, and Europe and leaning into the opportunities in fast growing regions, such as Latin America, and Asia Pacific, while stabilizing greater China. We will also continue to pursue a successful next chapter for.

Michelle: And third to accelerate growth across our geographic portfolio by generating profitable growth in our largest regions North America, and Europe and leaning into the opportunities in fast growing regions, such as Latin America, and Asia Pacific, while stabilizing greater China. We will also continue to pursue a successful next chapter for.

Michelle: Dockers as we explore a sale of the brand and we remain confident about the prospects for beyond yoga to one day become a billion dollar brand.

Michelle: We will deliver these priorities by focusing on operational excellence, improving the structural economics of our business and optimizing our processes and ways of working we have a talented and committed team in place to deliver these objectives and we're encouraged by the progress we have achieved together in year. One of this next chapter for Allison.

Michelle: Dockers as we explore a sale of the brand and we remain confident about the prospects for beyond yoga to one day become a billion dollar brand.

Michelle: Yeah.

Michelle: With that I'm going to hand, it over to Amit to review our performance in the fourth quarter and expectations for 2025 and more detail Amit.

Amit: Thank you Michelle we closed out the year on a strong note with Gordon for net revenues profitability free cash flow and overall earnings exceeding our guidance.

Michelle: <unk>.

Michelle: With that I'm going to hand, it over to Amit to review our performance in the fourth quarter and expectations for 2025 and more detail Amit.

Amit: Particularly pleased with the sequential progression and improvement of our structural economics as we move through the year, enabling us to enter 2005.

Amit: Thank you Michelle we closed out the year on a strong note with Gordon for net revenues profitability free cash flow and overall earnings exceeding our guidance.

Amit: Real momentum.

Amit: Organic net revenues accelerated through the year ending up 8% in quarter four.

Amit: While DTC momentum continued through the year wholesale ended the year strong up 3% in quarter four.

Amit: Politically pleased with the sequential progression and improvement of our structure and economics as we move through the year, enabling us to enter 2005.

Gross margins accelerated from $59 three in each one grew 60% in Q3 and 61, 3% in Q4.

Amit: Real momentum.

Amit: Organic net revenues accelerated through the year ending up 8% in quarter four.

Amit: Adjusted EBIT margin accelerated from seven 6% in age one to 11, 6% in Q3 and 13, 4% in Q4.

Amit: While DTC momentum continued through the year wholesale ended the year strong up 3% in quarter four.

Amit: Gross margins accelerated from $59 three and Antoine grew 60% in Q3 and 61, 3% in Q4.

Amit: DDC productivity and improvement of the channels margins by more than 300 basis points contributed to the company's overall margin expansion for.

Amit: Adjusted EBIT margin accelerated from seven 6% in age one to 11, 6% in Q3 and 13, 4% in Q4.

Amit: For the full year, we also generated record free cash flow and improved return on invested capital that is now in the mid teens.

Amit: DDC productivity and improvement of the channels margins by more than 300 basis points contributed to the company's overall margin expansion for.

Amit: This momentum continued into December.

Amit: Strong holiday selling season in both direct to consumer and wholesale as well as a solid start to quarter 125.

Amit: For the full year, we also generated record free cash flow and improved return on invested capital that is now in the mid teens.

Let's briefly go through the results starting with revenue revenues accelerated in Q4 and.

Amit: This momentum continued into December with a strong holiday selling season in both direct to consumer and wholesale as well as a solid start to quarter 125.

Amit: Came in higher than our expectations outperformance in the quarter was driven by men's U S wholesale and Europe direct to consumer.

Amit: Mexico and Dockers also returned to growth.

Amit: Let's briefly go through the results starting with revenue revenues accelerated in Q4 and came in higher than expectations outperformance in the quarter was driven by men's U S wholesale and Europe direct to consumer.

Amit: All references to revenue as we refer to organic revenues rich as you will hear and 25% overall organic revenue growth is expected to continue to accelerate.

Amit: Turning to margins, we saw a significant year over year improvement in both gross.

Amit: Mexico and Dockers also returned to growth.

Amit: And operating margins.

Amit: All references to revenue as we refer to organic revenues rich as you will hear and 25% overall organic revenue growth is expected to continue to accelerate.

Amit: Gross profit for the fourth quarter was $1 1 billion or 61, 3% of net revenues, an all time record gross margin for the company.

Amit: Gross margin expanded 350 basis points relative to last year ahead of our expectations driven primarily by the continued benefit of lower product costs, including savings from fuel initiatives the shift to DTC as well as higher full price.

Amit: Turning to margins, we saw a significant year over year improvement in both gross and.

Amit: And operating margins gross profit for the fourth quarter was $1 1 billion or 61, 3% of net revenues, an all time record gross margin for the company.

Amit: Sales.

Amit: Adjusted SG&A expenses in the quarter increased 17% to $880 million, primarily reflecting the expenses associated with higher sales.

Amit: SG&A deleverage was driven by increased investment in A&P.

Amit: Distribution expenses as a result of our DC transition and higher compensation incentives given our quarter four performance offset by leverage on selling expenses, which we achieved through greater focus on store profitability.

Amit: Sales.

Amit: Adjusted SG&A expenses in the quarter increased 17% to $880 million, primarily reflecting the expenses associated with higher sales.

Amit: Cash G&A deleverage was driven by increased investment in A&P higher distribution expenses as a result of our DC transition and higher compensation incentives given our quarter four performance.

Amit: For context, SG&A will end the year at 49, 8% of revenues and we expect the percentage to be broadly the same in 'twenty five.

Amit: Offsetting by leverage on selling expenses, which we achieve through greater focus on store profitability.

Amit: Gross profit dollars increased by 19% and outpace adjusted SG&A dollars growth leading to EBIT leverage.

Amit: For context, SG&A will end the year at 49, 8% of revenues and we expect the percentage to be broadly the same in 'twenty five.

Amit: Adjusted EBIT margin increased 120 basis points to 13, 4% in quarter, four and 10, 2% on a full year basis.

Amit: Gross profit dollars increased by 19% and outpace adjusted SG&A dollars growth leading to EBIT leverage.

Amit: Adjusted EBIT dollars grew 23% versus last year for the quarter and 17% on a full year basis.

Amit: Adjusted EBIT margin increased 120 basis points to 13, 4% in quarter four.

Amit: Adjusted diluted EPS of <unk> 50 was up 14% to prior year for both the quarter and the year.

Amit: And 10, 2% on a full year basis.

Amit: We ended the year with reported inventory dollars down 4% to prior year.

Amit: Adjusted EBIT dollars grew 22% versus last year for the quarter and 17% on a full year basis.

Amit: Turning to dividend and share repurchases for the full year, we returned $289 million to shareholders, which was up 45% to prior year.

Amit: Adjusted diluted EPS of <unk> 50.

Amit: It was up 14% to prior year for both the quarter and the year.

Amit: This includes $199 million and dividends of 4% versus prior year and $90 million in share repurchases.

Amit: We ended the year with reported inventory dollars down 4% to prior year.

Amit: Turning to dividend and share repurchases for the full year, we returned $289 million to shareholders, which was up 45% to prior year.

Amit: In quarter 125, we declared a dividend of 13 cents per share an increase of 8% versus prior year and.

Amit: This includes $199 million and dividends of 4% versus prior year and $90 million in share repurchases.

Amit: And we remain committed to returning capital to our shareholders in 2025.

Amit: Now, let's review the key highlights by segment.

Amit: In quarter 125, we declared a dividend of 13 cents per share an increase of 8% versus prior year and.

Amit: The Americas net revenues were up 9% higher full price sales improved traffic trends and better in stock positions led to 11% growth in U S direct to consumer.

Amit: And we remain committed to returning capital to our shareholders in 2025.

Amit: And Mexico returned to growth supported by strength in wholesale.

Amit: Now, let's review the key highlights by segment.

Amit: The Americas net revenues were up 9% higher full price sales improved traffic trends and better in stock positions led to 11% growth in U S direct to consumer.

Amit: <unk> gross margin drove operating margin of 26, 5% for the segment, improving 270 basis points versus prior year.

Amit: Europe net revenues increased 6% in quarter, four with all key markets delivering growth.

Amit: And Mexico returned to growth supported by strength in wholesale.

Amit: <unk> gross margin drove operating margin of 26, 5% for the segment, improving 270 basis points versus prior year.

Amit: Direct to consumer accelerated in the quarter up 17%.

Amit: <unk> performance in E Commerce, which was up 23%.

Amit: Operating margin of 18, 3% was up 130 basis points to Brian.

Amit: Europe net revenues increased 6% in quarter, four with all key markets delivering growth.

Amit: Asia net revenues increased 9% compared to prior year.

Amit: Direct to consumer accelerated in the quarter up 17%.

Amit: <unk> net revenues increased 8% led by strength in company operated stores. In addition to wholesale net revenue which were up 10%.

<unk> performance in E Commerce, which was up 23%.

Brian: Operating margin of 18, 3% was up 130 basis points to Brian.

Amit: We saw real momentum in key markets led by India, Japan, and Turkey, which were up double digits.

Brian: Asia net revenues increased 9% compared to prior year.

Amit: In China, we have reorganized our leadership team and expect this market to return to growth over time, but we had modest expectations for 2025.

Brian: <unk> net revenues increased 8% led by strength in company operated dose in it.

Brian: Addition to wholesale net revenue, which were up 10%.

Brian: We saw real momentum in key markets led by India, Japan, and Turkey, which were up double digits.

Amit: Operating margin of eight 4% contracted 360 basis points to last year.

Primarily due to the margin loss in the China business as well as from higher spend in DTC expansion and advertising.

Brian: In China, we have reorganized our leadership team and expect this market to return to growth.

Brian: But we had modest expectations for 2025.

Amit: Now, let's turn to our fiscal 'twenty five in Q1 25 outlook. We are pleased with our Q4 results and the momentum into Q1 'twenty. Five. However, we recognize it continues to be a lot of uncertainty related to the macro environment potential tariff change.

Brian: Operating margin of eight 4% contracted 360 basis points to last year.

Brian: Mainly due to the margin loss in the China business as well as from highest spend in DTC expansion and advertising.

Amit: <unk> is in the tax code as well as worsening foreign exchange.

Brian: Now, let's turn to our fiscal 'twenty five in Q1 25 outlook. We are pleased with our Q4 results and the momentum into Q1 'twenty five.

Amit: While we have a number of initiatives that we believe will help us to drive organic sales and earnings in the next few years. The best approach for US is to plan prudently.

Brian: We recognize it continues to be a lot of uncertainty related to the macro environment potential changes.

Amit: We expect full year organic net revenues to grow three and a half to four five percentage.

Brian: Changes in the <unk> as well as worsening foreign exchange.

Brian: While we have a number of initiatives that we believe will help us to drive organic sales and earnings in the next few years. The best approach for US is to plan prudently.

Amit: As a reminder, net organic revenue growth, excluding FX the exit of denizen in footwear and the impact of the 53rd week.

Amit: Based on current FX exchange rates currency is expected to be 250 basis points drag to 'twenty five revenues, primarily driven by the euro Mexican peso and the Indian rupee.

Brian: We expect full year organic net revenues to grow three and a half to four five percentage.

Brian: As a reminder, net organic revenue growth, excluding FX the exit of denizen in footwear and the impact of the 53rd week.

Amit: The impact of denizen in footwear exits and last year's 50, <unk> week will collectively account for a 300 basis points headwind.

Brian: Based on current FX exchange rates currency is expected to be 250 basis points drag to <unk> 25 revenues, primarily driven by the euro Mexican peso and the Indian rupee.

Amit: Incorporating all of these items reported net revenues are expected to be down 1% to 2%.

Brian: The impact of denizen in footwear exits and last year's 50, <unk> week will collectively account for a 300 basis points headwind.

Amit: By channel our expectations include high single digit organic growth in direct to consumer for the full year.

Amit: Driven by positive comps in opening of the new doors and continued growth in e-commerce.

Brian: Incorporating all of these items reported net revenues are expected to be down 1% to 2%.

Amit: And in wholesale while encouraged by our recent results.

Brian: Okay.

Brian: China, our expectations include high single digit organic growth in direct to consumer for the full year driven.

Amit: We are taking a prudent approach to planning this business and expect the channel to be flat for the full year on an organic basis.

Driven by positive comps in opening of the new doors and continued growth in e-commerce.

Amit: Turning to gross margin, we expect full year expansion of 100 basis points to approximately 61%.

Brian: And in wholesale while encouraged by our recent results.

Amit: This reflects continued benefits from lower product costs, driven by project fuel savings.

Brian: We are taking a prudent approach to planning this business and expect the channel to be flat for the full year on an organic basis.

Amit: Two new structural shift to DTC international and womens and the benefit from exiting low margin denizen and footwear businesses.

Brian: Turning to gross margin, we expect full year expansion of 100 basis points to approximately 61%.

Amit: We expect the full year SG&A rate to be approximately 50% about flat to 2020 for.

Brian: This reflects continued benefits from lower product costs, driven by project fuel savings.

Amit: The continued expenses associated with growing DTC are offset by cost management initiatives as we continue to improve the structural economics of this business.

Brian: Structural shifts to DTC international and womens and the benefit from exiting low margin denizen and footwear businesses.

Amit: This translates to an EBIT margin of around 10 nine to 11, 1%.

Brian: We expect the full year SG&A rate to be approximately 50% about flat to 2020 for.

Amit: Significant expansion from prior year.

Brian: The continued expenses associated with growing DTC are offset by cost management initiatives as we continue to improve the structural economics of this business.

Amit: We expect our full year effective tax rate to be approximately 23%.

Amit: This reflects the normalization of our tax rate after realizing benefits from our strategic tax planning in the previous years.

Brian: This translates to an EBIT margin of around 10 nine to 11, 1%.

Amit: As a result of these assumptions adjusted diluted EPS is expected to be in the range of $1 20 to $1 25, including an approximate 20% headwind from the higher tax rate.

Brian: Significant expansion from prior years.

Brian: We expect our full year effective tax rate to be approximately 23%.

Brian: This reflects the normalization of our tax rate after realizing benefits from our strategic tax planning in the previous years.

Amit: And foreign exchange.

Amit: On the Capex line, we plan to invest approximately $260 million, primarily to support store openings fleet improvements and our digital business.

As a result of these assumptions adjusted diluted EPS is expected to be in the range of $1 20 to $1 25, including an approximate 20% headwind from the higher tax rate.

Amit: After opening 100 net new doors in 2024, we expect to have 50 to 60 net new system dose this year positioning us to exit 25 with it.

Brian: And foreign exchange.

Brian: On the Capex line, we plan to invest approximately $260 million, primarily to support store openings fleet improvements and our digital business.

Amit: <unk> 3500 stores.

Now turning to the first quarter.

Amit: We expect organic net revenue growth of three and a half to four 5%. This excludes approximately three five points of foreign exchange headwinds and two points attributable to the exit of denizen, and footwear business, which implies being down 1% to 2% for the quarter on a report.

Brian: After opening 100 net new doors in 2024, we expect to have 50 to 60 net new system dose this year positioning us to exit 25 with around 3500 stores.

Brian: Now turning to the first quarter.

Brian: We expect organic net revenue growth of three five to four 5%. This excludes approximately three five points of foreign exchange headwinds and two points attributable to the exit of denizen, and footwear business, which implies being down 1% to 2% for the quarter on a report.

Amit: Basis.

Amit: Gross margin is expected to be up between 150 to 200 basis points in EBIT margin is expected to be between 10.2 to 10, 5% expanding 120 to 150 basis points was this prior year.

Brian: Basis.

Brian: Gross margin is expected to be up between 150 to 200 basis points in EBIT margin is expected to be between 10, two to 10, 5% expanding 120 to 150 basis points was this prior year.

Amit: This translates to an EPS of approximately 26 to 28 cents, which includes a 2% to 3% headwind from foreign exchange.

Amit: Our 2025 guidance is grounded on a balance of both organic revenue growth and margin expansion over the last several years, we've made a concerted effort to become a leaner more efficient focused and profitable company. This strategy is paying off in the form of faster growth.

Brian: This translates to an EPS of approximately 26 to 28 cents, which includes a 2% to 3% headwind from foreign exchange.

Brian: Our 2025 guidance is grounded on a balance of both organic revenue growth and margin expansion over the last several years, we've made a concerted effort to become a leaner more efficient focused and profitable company. This strategy is paying off in the form of faster growth.

Amit: Higher margins and improved returns as evidenced by organic revenue growth progressing from flat in fiscal 'twenty, 323% in 2004 to three and a half to four 5% expected in 2005.

Amit: Gross margins progressing from $56, 9% in 'twenty, 3% to 60% in 'twenty, four and 61% expected in 'twenty five adjusted.

Brian: Higher margins and improved returns as evidenced by organic revenue growth progressing from flat in fiscal 'twenty, 323% and 24 to three and a half to four 5% expected in 'twenty five.

Amit: Adjusted EBIT margins progressing from 9% in 'twenty, 3% to 10% in 2004% to 11% expected in 'twenty five.

Brian: Gross margins progressing from 56, 9% in 'twenty, 3% to 60% in 'twenty, four and 61% expected in 2005 <unk>.

Amit: Free cash flows moving from over $100 million in 'twenty, three to more than $600 million and 24.

Amit: And our ROIC has.

Amit: Has improved from 12, 9% in 'twenty three to 14, 9% in 2004.

Brian: Adjusted EBIT margins progressing from 9% in 'twenty, 3% to 10% in 2004% to 11% expected in 'twenty five.

Amit: Overall 2024 firmly establish the foundation of our ongoing transformation to a DDC first denim lifestyle company.

Brian: Free cash flows moving from over $100 million in 'twenty, three to more than $600 million and 24.

Brian: And our ROIC has improved from 12, 9% in 2003 to 14, 9% in 2004.

Amit: Existing the year with momentum and I'm confident that we are improving the structural economics of this business as we set our eyes unbecoming.

Brian: Overall 2024 firmly establish the foundation of our ongoing transformation to a DTC first denim lifestyle company.

Amit: $10 billion company with 15% operating margins.

Amit: And with that I will open up the call for Q&A.

Amit: Yes.

Brian: We are exiting the year with momentum and I'm confident that we are improving the structural economics of this business as we set our eyes on becoming a $10 billion company with 15% operating margins.

Amit: Thank you the floor is now open for questions. If you have a question. Please press Star then the number is one one on your telephone keypad.

Amit: Constraints the company request that you ask only one question. If you have any additional questions. Please queue up again if at any point. Your question has been answered you may remove yourself from the queue.

Brian: With that I will open up the call for Q&A.

Brian: Okay.

Brian: Thank you the floor is now open for questions. If you have a question. Please press Star then the number is one one on your telephone keypad due to time constraints. The company request that you ask only one question. If you have any additional questions. Please queue up again, if at any point. Your question has been answered you may.

Amit: Our first question.

Amit: Comes from the line.

Amit: Jay sole of UBS. Your question. Please Jay.

Speaker Change: Great. Thank you so much I guess a couple of questions first.

Speaker Change: You talked you mentioned that the first quarter data is good obviously you gave some guidance talking about.

Brian: Remove yourself from the queue.

Brian: Our first question.

Speaker Change: Again in growth I think a free cap to four 5% for Q1 can you talk about December went opposite the key months and the holiday season.

Brian: Comes from the line.

Brian: Jay sole of UBS. Your question. Please Jay.

ashish: And then at the same time can you maybe dive into Ashish.

Speaker Change: Q4.

Jay: Great. Thank you so much.

Speaker Change: Maybe give a little bit more color on the drivers quantifying if possible and then on the tax rate.

Speaker Change: A couple of questions first.

Speaker Change: You mentioned that first quarter data is good obviously, you gave some guidance talking about.

Speaker Change: Yes.

It's all about the tax planning is there a global minimum tax impact.

Speaker Change: Organic growth I think it grew <unk>, 5% for Q1 can you just talk about our December one obviously, it's a key months and the holiday season.

Speaker Change: Those are the three questions that I have thank you.

Speaker Change: Hey, Jay.

ashish: And then at the same time can you maybe dive into Ashish.

Amit: This is amit.

Speaker Change: So let me try and address.

Speaker Change: Nucor.

Three questions quickly.

Speaker Change: Maybe give a little bit more color on the drivers quantifying if possible and then on the tax rate.

Speaker Change: We don't give December.

Speaker Change: Separately, but we do talk about nor Simba.

Speaker Change: Yes.

Speaker Change: It's all about the tax planning is there a global minimum tax impact.

Speaker Change: Which is November and December and I'd say first we had a very strong holiday season.

Speaker Change: Those are the three questions that I have thank you.

Speaker Change: Hey, Jay.

Amit: This is amit.

Speaker Change: The U S continued its.

So let me try and address.

Speaker Change: Strength across both.

Three questions quickly.

Speaker Change: DTC and wholesale so November was up on an organic basis by 8%.

Amit: We don't give December.

Amit: Separately, but we do talk about November.

Speaker Change: And so on gross margin continued to improve and so thats your perspective or your response to your December question.

Amit: Which is November and December and I'd say first we had a very strong holiday season.

Amit: The U S continued its.

Speaker Change: The second question I think you asked was SG&A.

Amit: Strength across both.

Amit: DTC and wholesale so north timber was up on an organic.

Speaker Change: SG&A.

Speaker Change: It was up we recognize that we acknowledge it is higher than prior to that.

Amit: Nick basis by 8%.

Amit: And so on gross margin continued to improve and so thats.

Speaker Change: Our expectation, but as we planned 25, we are confident that SG&A.

Amit: Our perspective or your response to your December question.

Speaker Change: It will be in line as a percentage of revenue as where we ended 2024, so what drove the SG&A increase.

Amit: The second question I think you asked was SG&A.

Amit: SG&A.

Speaker Change: I'd say half of that was volume and compensation incentives and the other half was probably Q4 specific items.

It was up we recognize that we acknowledge it is higher than prior to that.

Amit: Expectation, but as we planned 25, we are confident that SG&A.

Speaker Change: The higher sales and higher comp was about half the other specific items first higher advertising.

Amit: We'll be in line as a percentage of revenue as where we ended 2024, so what drove the SG&A increase.

That's a combination of two things.

Speaker Change: The majority of the increase year over year was because in 'twenty three.

Amit: I'd say half of that was volume and compensation incentives and the other half was probably Q4 specific items.

Speaker Change: As we.

Speaker Change: Took pricing reductions to offset that we did cut advertising. So we would normalize that in.

Amit: The higher sales and higher comp was about half the other specific items first higher advertising.

Speaker Change: Q4, and the other piece was in the new beyond say campaign. The other thing we did do we did spend a little bit more on demand advertising because e-commerce.

Amit: That's a combination of two things.

Amit: The majority of the increase year over year was because in 'twenty three.

Speaker Change: As we.

Speaker Change: Into the holiday season in November was fairly strong and we just.

Amit: As we.

Took pricing reductions to offset that we did cut advertising. So we would normalize that.

Speaker Change: Ensure that.

Speaker Change: Trend continued which was reflected in December.

Amit: Q4, and the other piece was in the new beyond say campaign. The other thing we did do we did spend a little bit more on demand advertising because e-commerce.

Speaker Change: <unk> third week was about 25 odd million dollars SBA extra expense and then we had distribution expenses related to the cut overs from canton and our distribution center.

Amit: As we.

Amit: Enter the holiday season in November was fairly strong and we just.

Amit: Yes.

Speaker Change: In Germany.

Amit: Ensure that that trend.

Speaker Change: Overall as you can see we still.

Amit: Trend continued which was reflected in December.

Speaker Change: Grew EBIT margins by 120 basis points, so in 'twenty five.

The 50 <unk> week was about 25 odd million dollars. That's the extra expense and then we had distribution expenses related to the cut overs from canton and our distribution center in Germany.

Speaker Change: Our expectation is.

Speaker Change: That this.

Speaker Change: The growth you've seen in Asia will not continue our SG&A as a percentage of revenue will be around 50% as I said in my.

Amit: Overall as you can see we still.

Speaker Change: <unk>.

Amit: Grew EBIT margins by 120 basis points, so in 'twenty five.

Speaker Change: <unk> remarks, and we have already seen in December.

Speaker Change: The right normalize and so.

Amit: Our expectation is that this.

Speaker Change: We're confident that our SG&A.

Amit: The growth rate, you've seen and as you will not continue our SG&A as a percentage of revenue will be around 50% as I said in my.

Speaker Change: SG&A.

Speaker Change: In 25 would be at normal levels. Your third question I think was about.

Speaker Change: <unk>.

Amit: In our prepared remarks, and we have already seen in December SG&A rate normalized and so.

Speaker Change: The last few years.

Speaker Change: We have.

Speaker Change: Largely we had foreign tax credits that were expiring so tax planning strategies were undertaken to offset the expiring tax foreign tax credits in that.

Amit: Confident that.

Amit: <unk>.

Amit: 25 would be at normal levels. The third question I think was about.

Speaker Change: And have made a difference to the tax rate given that the remaining foreign tax credits are not material.

Amit: Vertex.

Amit: The last few years, we have.

Speaker Change: Believe the tax rate normalizes.

Amit: Largely we had foreign tax credits that were expiring so tax planning strategies were undertaken to offset the expiring tax foreign tax credits in that.

Speaker Change: In 'twenty five.

Speaker Change: Surround are reflected.

Speaker Change: In my script about 23%, we're still if you compare ourselves to a lot of our peers still is there.

Amit: And have made a difference to the tax rate given that the remaining foreign tax credits are not material, we believe the tax rate normalizes.

Speaker Change: Relatively competitive.

Speaker Change: Got it okay. Thank you so much.

Speaker Change: Yes.

Amit: In.

Amit: 25 turnaround.

Speaker Change: Thank you.

Amit: Surround are reflected.

Speaker Change: Our next question comes from the line of Paul <unk> Barclays. Please go ahead Paul.

Amit: In my script about 23%, we're still if you compare ourselves to a lot of our peers still is there.

Paul: Hi, Good evening. Thanks for taking my question can you talk about your outlook for the wholesale channel into 2025 to be flat what is driving the conservative outlook and anything that you can share on the order book by geography, and my second question is can you talk about the drivers of improvement from the DTC margin and the potential to further expand.

Amit: Relatively competitive.

Speaker Change: Got it okay. Thank you so much.

Amit: Yes.

Amit: Thank you.

Speaker Change: Our next question comes from the line of Paul <unk> Barclays. Please go ahead Paul.

Paul: Hi, Good evening. Thanks for taking my question can you talk about your outlook for the wholesale channel into 2025 to be flat what is driving the conservative outlook and anything that you can share on the order book by geography, and my second question is can you talk about the drivers of improvement in the DTC margin and the potential to further expand.

Speaker Change: Thank you sure Hi pilots Michelle I'll take the first part of your question regarding wholesale and then Hanmi will talk about DTC.

Paul: Profitability. So first in regards to wholesale.

Paul: And global wholesale I'll start there we were pleased that we saw an inflection to growth in the fourth quarter were up 3% globally up 4% in U S. Wholesale for the Levi's brand. So that includes both red tab and signature and I'd say simply that was driven by better execution on our part better in stock.

Paul: Thank you sure Hi pilots Michelle I'll take the first part of your question regarding wholesale and then Hanmi will talk about DTC.

Paul: Profitability. So first in regards to wholesale.

Paul: And global wholesale I'll start there we were pleased that we saw an influx into growth in the fourth quarter were up 3% globally up 4% in U S. Wholesale for the Levi's brand. So that includes both red tab and signature and I'd say simply that was driven by better execution on our part better in stock.

Paul: We actually had to chase some items that we're selling through.

Paul: I felt good about that and then secondly.

Paul: In regards to our customers being excited about our fashion set, especially loose and baggy and then our broader lifestyle assortments.

Paul: More women's more tops and like I said overall more more fashion to your point, we are guiding flat for the year as we look forward order books in Europe are positive I will say that but we're taking.

Paul: We actually had to chase some items that we're selling through.

Paul: I feel good about that and then secondly.

Paul: In regards to our customers being excited about our fashion set, especially loose and baggy and then our broader lifestyle assortments.

Paul: A prudent stance on this because we have over time seen some.

Paul: <unk> and <unk>.

Paul: And the channel.

Paul: But like I said, we're encouraged with the underlying health in the results. We saw in the fourth quarter. There's nothing unusual expected as we look forward. It's just that we are like I said being being prudent given our experience with the wholesale channel over the last couple of years.

Paul: A prudent stance on this because we have over time teams some volatility.

Paul: And Paul.

Paul: And the channel.

Paul: Paul welcome to the Levi's coverage.

Paul: The your question on DTC profitability.

Paul: Overall for the year Dd's.

Paul: BDC profitably there as I mentioned was up 380 basis points.

Paul: Paul.

Paul: It was and is a combination of.

Paul: Paul welcome to the Levi's coverage.

Paul: Higher productivity on the top line as well as better management.

Paul: The your question on DTC profitability.

Paul: Of the store. So let me talk to you about a few things that we're doing first we have really streamline our selling model.

Paul: Overall for the year Dd's.

Paul: BDC profitably there as I mentioned was up 380 basis points.

But making sure.

Paul: Stylus and the store associates really focus on selling.

Paul: It was and is a combination of higher.

Paul: Activity on the top line as well as better management.

Paul: We have.

Paul: We're really looking at our.

Paul: Compensation incentive program. So that people are geared around both the topline and bottom line. We're also.

Paul: Of the store. So let me talk to you about a few things that we're doing first interview really streamline our selling model.

Paul: Really refined.

Paul: Making sure.

Paul: Our labor model and.

Paul: Stylists and the store associate really focus on selling.

Paul: We are seeing efficiency.

Paul: Cross.

Paul: We have.

Paul: That line.

Paul: We're really looking at our.

Paul: And we're just getting started we started with the U S. We're taking it to other parts of the world and we really.

Paul: Compensation incentive program. So that people are geared around both the topline and bottom line. We're also.

Paul: Upgrading our systems to better forecasting.

Paul: Really refined.

Paul: And better inventory management. So those are the factors that have really driven a better throughput.

Paul: Our labor model and.

Paul: We are seeing efficiency.

Paul: <unk>.

Paul: That line.

Paul: And higher EBIT margin then.

Paul: We're just getting started we started with the U S. We're taking it to other parts of the world and we really.

Paul: As we have this ambition to be a DTC, Firstly led company, where DTC is going to be.

Paul: Upgrading our systems to better forecast team.

Paul: <unk> 55, plus percent of the business driving a higher productivity and profitability in DTC is is important so we're making a lot of progress there the other thing thats happening.

Paul: And better inventory management. So those are the factors that have really driven.

Paul: Better throughput.

Paul: And higher EBIT margin then.

Paul: As we have this ambition to be a DDC, Firstly led company, where DTC is going to be.

Paul: Side improvement in stores is.

Paul: E Commerce profitability.

Paul: As E Commerce has ramped up has also dramatically improved.

Paul: 55, plus percent of our business driving.

Paul: E Commerce profitability fully loaded is now in the low double digits. So those are the.

Paul: Higher productivity and profitability in DTC as is important so we're making a lot of progress there the other thing thats happening.

Paul: Two.

Paul: Things that are helping drive profitability on our direct to consumer business.

Paul: Beside improvement in stores.

Paul: E Commerce profitability.

Paul: Thank you very much.

Paul: As E Commerce has ramped up.

Paul: Yes.

Paul: So dramatically improved and e-commerce profitability fully loaded is now in the low double digits. So those are the.

Paul: Thank you.

Speaker Change: Next question comes from the line of Matthew Boss of Jpmorgan. Your line is open Matthew.

Paul: Two.

Matthew Boss: Great. Thanks.

Paul: <unk> data.

Michelle could you speak to health of the denim category exiting holiday, maybe larger picture in the U S and in Europe, and just your overall confidence in the three five to four and a half organic for 25 any new categories that you are prioritizing and what youre seeing from pricing power for the brand.

Paul: Helping drive profitability on our direct to consumer business.

Paul: Thank you very much.

Paul:

Paul: Thank you.

Speaker Change: Our next question comes from the line of Matthew Boss of Jpmorgan. Your line is open Matthew.

Matthew Boss: Great. Thanks, Michelle.

Speaker Change: Yeah, you bet. Thanks for the question Matt.

Speaker Change: Michelle could you speak to health of the denim category exiting holiday, maybe larger picture in the U S and Europe and just your overall confidence in the three five to four and a half organic for 25 any new categories that you are prioritizing and what youre seeing from pricing power for the brand.

Matthew Boss: So first one I would say if we look at.

Matthew Boss: This year, the global denim market the growth has been about 1% to 2% globally and as you know from our overall, 3% growth that was both organic and as it turns out reported thereabouts. We were ahead of the market. So we feel good about that relative to your question in the U S. I'd say you know.

Matthew Boss: Yeah, you bet. Thanks for the question Matt.

Speaker Change: So first one I would say if we look at the.

Speaker Change: This year, the global denim market the growth has been about 1% to 2% globally and as you know from our overall, 3% growth that was both organic and as it turns out reported thereabouts. We were ahead of the market. So we feel good about that relative to your question in the U S. I would say.

Matthew Boss: There'll and the denim market continues to be under some level of pressure and so it is paramount for us to continue to maintain and grow share.

Matthew Boss: And I'd say overall, we feel we feel good about that I mean, as you know in the men's area, we have the leading market share by a mile and were holding steady to that if you look at us and we generally look at the past 12 months and now for women's we are firmly in the number one position.

Speaker Change: Barrel and the denim market continues to be under some level of pressure and so it is paramount for us to continue to maintain and grow share.

Matthew Boss: And number one in the U S for market share and that's that's a big milestone for the company. So.

Speaker Change: And I'd say overall, we feel we feel good about that I mean, as you know in the men's area, we have the leading market share by a mile and were holding steady to that if you look at us and we generally look at the past 12 months and now for womens.

Matthew Boss: I would say, there's not been a ton of change in the overall market may be globally has slowed just a little bit but.

Matthew Boss: As we look out the forecast are generally the same the global market is expected to grow in that mid single digit range.

Firmly in the number one position.

Speaker Change: And number one in the U S for market share.

Matthew Boss: So I would say that about about the overall market share one piece to note in this all this I'll pivot needs for 2025 is I think an important thing as we no longer just think about our opportunity as denim bottoms right.

Speaker Change: Big milestone for the company so.

Speaker Change: I would say, there's not been a ton of change in the overall market may be globally has slowed just a little bit but as.

Speaker Change: As we look out the forecast are generally the same the global market is expected to grow in that mid single digit range.

Matthew Boss: Think about expanding our total addressable market or Tam as we call. It but this is really about this evolution from our business in denim bottoms to our business is total head to toe apparel rooted in denim and so when you think about that it really expand our lens of what's possible in terms of.

Speaker Change: So I would say that about about the overall market share one piece to note in this all this I'll pivot needs for 2025 is I think an important thing as we no longer just think about our opportunity as denim bottoms.

Speaker Change: We think about expanding our total addressable market or Tam as we call. It but this is really about this evolution from our business in denim bottoms to our business is total head to toe apparel rooted in denim and so when you think about that it really expand our lens of what's possible.

Matthew Boss: The bottoms business.

Matthew Boss: <unk> business and head to toe.

Matthew Boss: We also see trends.

Matthew Boss: In the marketplace.

Matthew Boss: When you think about denim trend, that's one thing, but if you look at other categories like active active athleisure that category continues to grow we're seeing I'll get to this in a moment around men in total non denim, but like in our new Tech platform for men, which is levi's way of doing sort of this athlete.

Speaker Change: In terms of the bottoms business tops business and head to toe.

Speaker Change: We also see trends.

Speaker Change: The marketplace. So when you think about denim trend, that's one thing, but if you look at other categories like active.

Matthew Boss: Sure.

Matthew Boss: We're seeing nice growth there and that will continue to always has to be true to the Levi's brand and then coupled with of course or beyond yoga brand, which is in its early days, but we do believe.

Speaker Change: Active athleisure that category continues to grow we're seeing I'll get to this in a moment around mens in total non denim, but like in our new Tech platform for men, which is levi's way of doing sort of this athleisure.

Matthew Boss: That has a lot of potential $1 billion brand Sunday and when we look at the long term on the active category those prospects continue to be very very good but within what we look ahead within both the U S and globally, we see a lot of upside in core denim and denim dresses and denim lifestyle for men and.

Speaker Change: Yeah, we're seeing nice growth there and that will continue to always has to be true to the Levi's brand and then coupled with of course.

Speaker Change: Our beyond Yoga brand, which is in its early days, but we do believe.

Speaker Change: That has a lot of potential $1 billion brand someday and when we look at the long term on the active category those prospects continue to be very very good but within what we look ahead within both the U S and globally, we see a lot of upside in core denim and denim dresses and denim lifestyle for men and.

Matthew Boss: And.

Matthew Boss: Just as a side note, while we have a very stronghold lead market share in men women's as you know we're underpenetrated. So we're at 36% this year, which is a gain from last year, but over time that should be 50% of our business right, that's new customers and increasing frequency with existing customers. There's just.

Speaker Change: Women and.

Speaker Change: Just as a side note, while we have a very stronghold lead market share in men women's as you know we're underpenetrated. So we're at 36% this year, which is a gain from last year, but over time that should be 50% of our business right, that's new customers and increasing frequency with existing customers.

Matthew Boss: A lot of upside.

As we close out the year as we said just now in our remarks.

Matthew Boss: Yes, we're proud of how we ended the year, we had a strong finish I mean, 12% reported but really our core metro of 8% organic growth is really strong and we saw that across all channels, all geographies and all categories and so and that momentum is being directly.

Speaker Change: A lot of upside as we as we close out the year is as we said just now in our remarks.

Speaker Change: Yes, we're proud of how we ended the year, we had a strong finish I mean, 12% reported but really our core metric of 8% organic growth is really strong and we saw that across all channels, all geographies and all categories and so and that momentum is being directly to <unk>.

Matthew Boss: Driven by our key strategies, which will continue so we made this year was a pivotal year, we made a lot of changes.

Matthew Boss: We've been doubling down on the Levi's brand, we've exited some businesses.

Matthew Boss: We're exploring a sale of doctors as you know, but with this focus it allows us to really accelerate those core strategies that are driving the business and I would say, while maintain and maintain leadership in men's.

Speaker Change: Even by our key strategies, which will continue so we made this year was a pivotal year, we made a lot of changes.

Matthew Boss: <unk> resiliency and stable modest growth for wholesale the real acceleration on the business are going to be these underpenetrated areas like women's.

Speaker Change: We've been doubling down on the Levi's brand, we've exited some businesses.

Speaker Change: We're exploring a sale of doctors as you know, but with this focus it allows us to really accelerate those core strategies that are driving the business and I would say wow.

Matthew Boss: Denim lifestyle call it tops skirts dresses et cetera.

Matthew Boss: And of course direct to consumer which is our overarching strategy. So as we look to the year in driving three five to four 5% organic which is a step up from our 3% organic this year. It really is about executing the playbook that is working today and then I just have to put out there that way.

Speaker Change: Pain and maintain leadership in men's.

Speaker Change: Ensure resiliency and stable modest growth for wholesale the real acceleration on the business are going to be these underpenetrated areas like women's like denim lifestyle call. It tops skirts dresses et cetera.

Speaker Change: And of course direct to consumer which is our overarching strategy. So as we look to the year in driving three five to four 5% organic which is a step out from our 3% organic this year. It really is about executing the playbook that is working today and then I just have to put out there that wild.

Matthew Boss: We're confident in the continued strength like I said in women's in DTC and non denim bottoms in mens and womens indirect to consumer maintaining comp growth E. Com et cetera that we're also doing this more profitably with expectation that growing EBIT margin by another just shy of 100 basis points. So.

Speaker Change: We're confident in the continued strength look I sat in women's in DTC and non denim bottoms in mens and womens indirect to consumer maintaining comp growth E. Com et cetera that we're also doing this more profitably with expectation that growing EBIT margin by another just shy of 100 basis points. So.

Speaker Change: Yeah, let's see for Hanmi and I, but we feel like we have very strong plans in place to achieve these objectives.

Speaker Change: Great I'll, let best of luck.

Speaker Change: Kim.

Speaker Change: Thank you. Our next question comes from the line Brooke Roach of Goldman Sachs. Please go ahead Brian.

Speaker Change: Let's see for Hanmi and I, but we feel like we have very strong plans in place to achieve these objectives.

Speaker Change: Good afternoon, and thank you for taking our question.

Speaker Change: Michelle I was hoping you could talk show is the opportunity that you see for organic growth next year by region is there anything that we should be contemplating where you see more or less opportunity between the Americas, Europe and Asia within the context of the three and a half to four 5% Guide and then for me I was hoping you could help us.

Speaker Change: Great I'll, let best of luck. Thank you.

Speaker Change: Thank you. Our next question comes from the line Brooke Roach of Goldman Sachs. Please go ahead Brooks.

Brooke Roach: Good afternoon, and thank you for taking our question Michel I was hoping you could contextualize the opportunity that you see for organic growth next year by region is there anything we should be contemplating where you see more or less opportunity between the Americas, Europe and Asia within the <unk>.

Speaker Change: Contextualize the opportunity for margin expansion are there any quarters, where we should be considering higher or lower margin rates either on gross margin opportunity on SG&A leverage. Thank you. So much broke I'll take the first one since you.

Speaker Change: <unk> number three and a half to four 5% guide.

Speaker Change: You asked for color on that I mean.

Speaker Change: Then for me I was hoping you could help us contextualize the opportunity for margin expansion are there any quarters, where we should be considering higher or lower margin rates either on gross margin opportunity on SG&A leverage. Thank you. So much broke I'll take the first one since.

Speaker Change: As we think about are the three reasons as you said the Americas, Europe, and Asia say broadly speaking, we're expecting low to mid single digits in the Americas mid single digits in Europe, Asia, and mid single digits and I think overall, you know that really goes hand in hand with those core strategies that I was just referring to around.

Speaker Change: You asked for color on that I mean.

Speaker Change: As we think about the three regions as you said the Americas, Europe, and Asia say broadly speaking, we're expecting low to mid single digits in the Americas mid single digits in Europe Asia mid single digits and I think overall, you know that really goes hand in hand with those core strategies that I was just referring to around.

Speaker Change: Really betting on DTC in every region, having you know overall for the year stable growth in wholesale the women's opportunity and then the denim lifestyle opportunity Harmeet may want to add a little color to that but I think that's overall, what you should what you should expect.

Speaker Change: Yes.

Speaker Change: Brooke to your question on gross margins first let me contextualize, what is going to drive gross margins for 2025.

Speaker Change: Really betting on DTC in every region having.

Speaker Change: Overall for the year stable growth in wholesale.

Speaker Change: Womens opportunity and then the denim lifestyle opportunity Harmeet may want to add a little color to that but I think that's overall, what you should what you should expect yes.

Speaker Change: We have indicated a 100 basis points of gross margin expansion and just to reinforce we've been growing gross margin now.

Speaker Change: For a while.

Speaker Change: Yes.

Speaker Change: I think when I joined the company it was close to 50%.

Brooke Roach: Brooke to your question on gross margins first let me contextualize, what is going to drive gross margins for 2025.

Speaker Change: 12 years later it is 60%.

Speaker Change: Last three years has grown nicely.

Brooke Roach: We have indicated a 100 basis points of gross margin expansion and just to reinforce we've been growing gross margin now.

Speaker Change: And so in next two weeks.

Speaker Change: We believe will expand by 100 basis points.

Speaker Change: Combination of factors the first I would say.

Brooke Roach: For a while.

Speaker Change: I think when I joined the company it was close to 50%.

Speaker Change: Improvement in cost of goods sold.

Speaker Change: 12 years later it is 60%.

Speaker Change: This is less about <unk>.

Speaker Change: Getting better rates from our vendors, it's a lot to do with what we're doing in project fuel and the transformation.

Speaker Change: Last three years has grown nicely.

Speaker Change: And so and next year.

Speaker Change: We believe will expand by 100 basis points.

Speaker Change: Fewer skus.

Speaker Change: Making sure that.

Speaker Change: Combination of factors the first I would say.

Speaker Change: We use fewer fabrics et cetera, just thinking about this a little differently.

Speaker Change: Improvement in cost of goods sold.

Speaker Change: This is less about getting better rates from our vendors. It's a lot to do with what we're doing in project fuel and the transformation.

Speaker Change: That's why we believe this benefits not only happen in 'twenty five but continue for what the second is the structural mix.

Speaker Change: DTC growth international growth women's growth, all structurally helping gross margin and the third is.

Speaker Change: Fewer skus.

Speaker Change: Making sure that.

Speaker Change: We use fewer fabrics et cetera, just thinking about this a little differently.

Speaker Change: Real focus on <unk>.

Speaker Change: Full price, especially as our products at home.

Speaker Change: That's why we believe this benefits not only happen in 'twenty five but continue for what the second is the structural mix.

Speaker Change: And making sure we're able to sell more on full full price over time. So that's really why we believe.

Speaker Change: <unk> growth international growth women's growth, all structurally helping gross margin and the third is this.

Speaker Change: <unk> will continue to.

Speaker Change: To improve and as we ensure that the SG&A increase year over year, Jed us is modest that drops.

Speaker Change: Real focus on <unk>.

Speaker Change: Full price, especially as our products at home.

Speaker Change: And making sure we're able to sell more full price over time. So that's really why we believe gross margins will continue.

Speaker Change: Onto onto EBIT SG&A also the modest growth is also driven by.

Speaker Change: We're not naming what the project fuel impact.

Speaker Change: To improve and as we ensure that the SG&A increase year over year.

Speaker Change: 25, largely because of the embedded in each of these line, but we're doing a lot to make sure our organic costs.

Speaker Change: Is modest that drops.

Speaker Change: Orange is chegg and in service to a DTC first enterprise to your question about timing of gross margin.

Speaker Change: Onto onto EBIT SG&A also the modest growth is also driven by.

Speaker Change: We're not naming what the project fuel impact in 'twenty five largely because of the embedded in each of these line, but we're doing a lot to make sure our organic costs.

Speaker Change: Our view is that the first half the.

Speaker Change: The gross margin expansion will be higher.

Speaker Change: Again, it's a question of what happened last year, but also.

Speaker Change: With all these other things we're doing on fuel I think the first half will probably be in the 150 to 100 range in the second half.

Speaker Change: And just check in service to a DTC first enterprise to your question about timing of gross margin.

Speaker Change: Our view is that the first half.

Speaker Change: Quarter three was probably.

Speaker Change: Half of that in quarter four is broadly flat largely because we had a very strong quarter for this is our expectation at this time.

Speaker Change: Gross margin expansion will be higher.

Speaker Change: Again, it's a question of what happened last year, but also.

Speaker Change: With all these other things we're doing on fuel I think the first half will probably be in the 150 to 100 range in the second half.

Speaker Change: And as the quarters are all well.

Speaker Change: To give you more information.

Speaker Change: Great. Thank you so much I'll pass it on.

Speaker Change: Quarter three is probably.

Speaker Change: Thank you.

Speaker Change: Half of that in quarter four is broadly flat largely because we had a very strong quarter for this is our expectation at this time.

Speaker Change: Next question comes from the line of Tracy Kogan of Citi. Your question. Please Tracy.

Speaker Change: And as the quarters are all we'll give you more information.

Tracy Kogan: Hey, guys, it's actually fall right.

Speaker Change: But can you talk about what square footage growth was in F. 'twenty four.

Speaker Change: Great. Thank you so much I'll pass it on.

Speaker Change: Thank you.

Tracy Kogan: Planning it to be in F 'twenty five.

Speaker Change: Our next question comes from the line of Tracy Kogan of Citi. Your question. Please Tracy.

Tracy Kogan: I think you gave the store openings, but could you talk about that by geography.

Tracy Kogan: And also if you could share what our comp performance has been in the stores that have entered the comp base in year one yes.

Speaker Change: Hey, guys, it's actually Paul that's right.

Speaker Change: Can you talk about what square footage growth was in F. 'twenty four and what you are planning to be in F. 'twenty five.

Yes.

Paul: Paul we don't necessarily give square footage, but I would say generally.

Speaker Change: I think you gave the store openings, but could you talk about that by geography.

Tracy Kogan:

Tracy Kogan: Our new stores that we're.

Tracy Kogan: Opening between.

Speaker Change: And also if you could share what comp performance has been in the stores that have entered the comp base in year one yes.

Tracy Kogan: Between two and a half.

Tracy Kogan: Two three and 4000 square feet Asia is more.

Tracy Kogan: Towards the two 5000 I think.

Speaker Change: Yes.

Paul: Paul we don't necessarily give square footage, but I would say generally.

Tracy Kogan: I think Europe is more in between the two in the U S is more towards the $3 4000, we're trying to open stores in that range. We don't open a lot of flagships.

Speaker Change:

Speaker Change: Our new stores that we're.

Speaker Change: Opening between.

Speaker Change: Between two and a half.

Tracy Kogan: Large stores and loyalty and that allows us to drive productivity.

Speaker Change: Two three and a half 4000 square feet.

Speaker Change: <unk> is more.

Speaker Change: Towards the two 5000 I think.

Speaker Change: From that perspective to your question, how many new doors did.

Speaker Change: <unk>.

Speaker Change: I think Europe is more in between the two in the U S is more towards the $3 4000, we're trying to open stores in that range. We don't open a lot of flagships.

Tracy Kogan: We opened in data.

Speaker Change: We're moving to more system.

Speaker Change: Those wishes a franchisee as well as us franchisees we have.

Speaker Change: Large stores and largely and that allows us to drive productivity.

Speaker Change: Three.

Speaker Change: Close to 3400 those at the end of 'twenty four I would say.

Speaker Change: From that perspective.

Speaker Change: To your question, how many new doors that we opened in data.

Speaker Change: Operated about 1200 also doors and the franchisees.

Speaker Change: We're moving to more system.

Speaker Change: Those wishes a franchisee as well as us franchisees we have.

Speaker Change: Largely operated as the rest.

Speaker Change: And I think as you.

Speaker Change: So in 2024, we opened.

Three.

Speaker Change: As a system a little over 100 doors.

Speaker Change: Close to 3400 those at the end of 'twenty four I would say.

Speaker Change: We also took back Colombia, which is not in the one hundreds who take in Colombia was a distributor market that was close to 100 doors in 'twenty. Three I think we opened close to 100 system does in 'twenty five.

Speaker Change: We are operated about 1200 also does and the franchisees.

Speaker Change: Largely operated as the rest.

Speaker Change: And I think as you.

Speaker Change: So in 2024, we opened.

Speaker Change: And our view is 50 to 60 at this stage largely because we do want to.

Speaker Change: As a system a little over 100 doors.

Speaker Change: Focus on growing us comp sales and system sales as we've done in the past.

Speaker Change: And so thats why we are keeping up 50% to 60 number where it is.

Speaker Change: Those opening I think Asia bulk of the doors are in Asia.

Speaker Change: And our view is 50 to 60 at this stage largely because we do want to.

Speaker Change: And.

Speaker Change: Followed by.

Speaker Change: Europe, followed by the U S.

Speaker Change: Focus on growing comp sales and system sales as we've done in the past.

Speaker Change: Are those mainland dose that we've opened over the last couple of years are really performing well. So over time, we will step up the number of those in the U S.

Speaker Change: And so thats why we are keeping up 50% to 60 number where it is.

Speaker Change: Those opening I think Asia bulk of the doors are in Asia.

Speaker Change: And so youll see that.

Speaker Change: <unk>.

Speaker Change: The other thing is the 50 to $60 for 2025 also incorporates two things.

Speaker Change: And.

Speaker Change: Followed by <unk>.

Speaker Change: Europe, followed by the U S.

Speaker Change: Are those mainland dose that we had opened over the last couple of years are really performing well. So over time, we will step up the number of doors in the U S.

Speaker Change: <unk>.

Speaker Change: Our.

Speaker Change: Past two years, we opened up because those as we intend to sell dock because we are we are.

Speaker Change: Completely shut that right now and then we are going to be going slower in China for obvious reasons.

Speaker Change: And so youll see that.

Speaker Change: The other thing is the 50 to $60 for 2025 also incorporates two things.

Speaker Change: As the business Underperforms, we want to daily hunker down and make sure that I.

Speaker Change: Existing does.

Speaker Change: Our.

Speaker Change: Better before we start.

Speaker Change: In the past two years, we opened up because those as we intend to sell dock because we are.

Speaker Change: Spending.

Speaker Change: I don't have that answer your question Paul.

Speaker Change: Completely shut that right now and then we are going to be going slower in China for obvious reasons.

Speaker Change: It does.

Speaker Change: And I guess the last one was just tough comps comp yes.

Speaker Change: As the business Underperforms, we want to really hunker down and make sure that I.

Speaker Change: So the comps.

Speaker Change: I think Michelle and her prepared remarks talked about high single digit comps for last year and the fact that you know.

Speaker Change: Existing does perform better before we start expanding.

Speaker Change: Don't know if that answer your question Paul.

Speaker Change: I love to save.

Speaker Change: From a <unk> DC.

Paul: It does.

Speaker Change: DTC.

Perspective, you know our performance delivering a trifecta, we've been reporting positive comp sales now for 11.

Paul: And I guess, the last one which is about comps comp yes.

Paul: So the comps.

Paul: Okay.

Paul: I think Michelle and her prepared remarks talked about high single digit comps for last year and the fact that you know.

Speaker Change: Plus quarters.

Speaker Change: And the new doors are performing well that should be opening those we also have a process here, where we do a postmortem and our hit rates.

I love to say.

Speaker Change: From a <unk> DC.

Paul: DTC.

Paul: Perspective.

Speaker Change: <unk> wishes to new doors.

Paul: Our performance in delivering a trifecta, we've been reporting positive comp sales now for 11.

Speaker Change: Meet their expectation hit rates are dramatically improved as you build a lot more discipline. The second piece of the DTC performance is E. Commerce E. Commerce has been growing in the high teens and the third is just the effect of the opening doors in the very few retailers I would submit to all of you that actually.

Paul: Plus quarters.

Paul: And the new doors are performing well that should be opening doors. We also have a process here, where we do a postmortem and our hit rates.

Paul: Which is do new doors.

Meet their expectation hit rates are dramatically improved as you build a lot more discipline. The second piece of the DTC performance is E. Commerce E. Commerce has been growing in the high teens and the third is just the effect of the opening doors in the very few retailers I would submit to all of you that actually.

Speaker Change: Yes.

Speaker Change: Delivering.

Speaker Change: An improvement in all three metrics for what.

Speaker Change: Yeah.

Speaker Change: Thanks, Tom and good luck. Thanks.

Speaker Change: Thanks, Paul.

Thank you.

Speaker Change: Our next question comes from the line of Laura vessel rescue.

Paul: <unk>.

Speaker Change: E&P Powerbar.

Paul: Delivering.

Lorena: <unk> please lorena.

Paul: An improvement in all three metrics for what.

Speaker Change: Thank you.

Good afternoon, Michele good afternoon, Amit thanks.

Speaker Change: Thanks for taking my question.

Paul: Thanks, Tom and good luck.

Speaker Change: I wanted to.

Speaker Change: Ask them on your 10-K, you are now breaking out distribution costs.

Paul: Thanks, Paul.

Paul: Thank you.

Speaker Change: Our next question comes from the line of Laura vascular SKU.

Speaker Change: Which I think were up by 21% or even in absolute terms for the year about $70 million, which I think most of that was the conversion from your own to third party logistics.

Speaker Change: E&P Powerbar.

Speaker Change: <unk> please lauren.

Speaker Change: Thank you.

Speaker Change: Good afternoon, Michele good afternoon, Amit Thanks for taking my question.

Speaker Change: How do we should we think about that line item.

Speaker Change: Pardon me I wanted to.

Speaker Change: On your 10-K, you are now breaking out distribution cost.

Speaker Change: For the full year and 25 and can you remind us.

Speaker Change: Which I think were up by 21% or even in absolute terms for the year about $70 million, which I think most of that was the conversion from your own to third party logistics.

Speaker Change: When that happened.

In the fourth quarter to third quarter, because I think we only have an annual number and then the second question Hanmi com.

Speaker Change: Contour brands I think 30% of their global productions in Mexico, just love to get your take on how much of your sourcing comes from Mexico globally, but more importantly into the United States. Thank you very much yeah.

Speaker Change: How do we should we think about that line item.

Speaker Change: For the full year and 25 and can you remind us.

Speaker Change: When that happened.

So I'll answer the second.

Speaker Change: Was it in the fourth quarter third quarter, because I think we don't have an annual number and then the second question Hanmi com.

Quickly which is.

Speaker Change: And I'll also add China, just for others, so as far as.

Speaker Change: Direct sourcing into the U S right.

Speaker Change: From China is less than 1% and for Mexico is about 5%.

Speaker Change: And so.

Speaker Change: It's.

Speaker Change: Quickly which is.

Speaker Change: It's not <unk>.

Speaker Change: And I'll also add China, just fathers, so as far as.

Speaker Change: Material.

Speaker Change: And if there is.

Speaker Change: Change in the tariff structure, we'll be able to address that because we cross those as you all know from 25 countries do you have a second question.

Speaker Change: Direct sourcing into the U S right.

Speaker Change: From China is less than 1% and for Mexico is about 5%.

Laura: Laura you get first prize for digging into our thinking like in an hour but.

Speaker Change: And so.

Speaker Change: It's.

Speaker Change: It's not.

Speaker Change: Material.

Laura: The.

Speaker Change: And if there is.

Speaker Change: To your question about distribution expenses.

Speaker Change: Change in the tariff structure, we'll be able to address that because we cross those as you all know from 25 countries do you have a second question.

Speaker Change: Yes, the year was up 21%. It was a combination of two things maybe we should explain better in the 10-K.

Speaker Change: Laura you get first prize for digging into our thinking like an owner.

One was we transferred distributions of distribution expenses say a year ago for E. Comm was a part of selling so we transferred that to where it should belong wishes and the distribution line. So that's about that's half of the 21% and the second is the pedal run of the DB.

Speaker Change: But.

Speaker Change:

Speaker Change: The.

Speaker Change: To your question about distribution expenses.

Yes, the year was up 21%. It was a combination of two things maybe we should explain better in the 10-K.

Speaker Change: <unk>, which is.

Speaker Change: One was we transferred distributions of distribution expenses say a year ago for E. Comm was a part of selling so we transferred that to where it should belong wishes and the distribution line. So that's about half of the 21% and the second is the pedal run of the DB.

Speaker Change: As we exit.

D C Kenton here and transition our D C.

Speaker Change: That was probably half of the so if you take the 21% about 9% as this transfer about 6% of the growth was the parallel running and so if you just look at distribution expenses organic distribution expenses.

Speaker Change: Dcs, which is.

Speaker Change: As we exit.

Speaker Change: D C.

Speaker Change: Kenton here in transition.

Speaker Change: To use the word organic here, but it's about 6% I think as we think about 'twenty five.

Speaker Change: D C.

Speaker Change: Again, the the comparable distribution expense will be probably 6% to 7% growth. There is the parallel running of the Dcs.

For a little while in 'twenty, five, but as we said earlier.

Speaker Change: I hate to use the word organic.

Speaker Change: But it's about 6% I think as we think about 'twenty five the again the the comparable distribution expense will be probably 6% to 7% growth. There is the parallel running of the Dcs.

Speaker Change: The map of our distribution centers should will be will drive savings.

Speaker Change: Beginning late 'twenty five early 'twenty, six which then improves structurally.

Speaker Change: The <unk>.

Speaker Change: Distribution expenses as a percentage of revenue, helping us get to the part of 15% EBIT.

For a little while in 'twenty five.

Speaker Change: As we said earlier the remap of our distribution centers should will be will drive savings.

Does that help you very helpful. Thank you very much and best of luck.

Speaker Change: Okay.

Thank you.

Speaker Change: Beginning late 'twenty five early 'twenty, six which then improves structurally.

Speaker Change: Our next question comes from the line of Jim Duffy of Stifel. Please go ahead Jim.

Speaker Change: The.

Speaker Change: Distribution expenses as a percentage of revenue, helping us get to the part of 15% EBIT.

Thank you Michelle Hey, Amit.

Amit: Doing well.

Speaker Change: Oh Wow.

Speaker Change: Does that help you very helpful. Thank you very much and best of luck.

Speaker Change: As you sure denim bottoms trending well, but you no longer think of the businesses just denim bottoms, Michelle specific to the Levi's brand can you help us with an update on tops bottoms mix and update us on the size and trajectory of.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Jim Duffy of Stifel. Please go ahead Jim.

Speaker Change: Thank you Michelle Hey, Amit.

Speaker Change: Non denim categories.

Speaker Change: You bet you that so.

Speaker Change: Doing well.

Speaker Change: Hello.

Speaker Change: First of all you know this is not an or.

Speaker Change: As you sure denim volumes trending well, but you no longer think of the businesses just denim bottoms Michelle specific to the Levi's brand can you help us with an update on tops bottoms mix and update us on the size and trajectory of.

Speaker Change: Yes.

And.

It starts with making sure that.

That our denim bottoms call. It authority our leadership continues to be healthy. So it's really important that we always drive innovation in the core like the 501, which again for the quarter was up based on.

Speaker Change: Non denim categories.

Speaker Change: You bet you bet so.

Speaker Change: First of all this is not an or.

Speaker Change: New evolutions of the 501 in fabrics and stuff like that 500, Ninety's et cetera, and then driving the fashion pits, which right now it's all about baggy and loose, but at some point, we'll do that to taper and skinny.

Speaker Change: Yes.

Speaker Change: And.

Speaker Change: It starts with making sure that.

Speaker Change: That our denim bottoms call. It authority our leadership continues to be healthy. So it's really important that we always drive innovation in the core like the 501, which again for the quarter was up based on.

Speaker Change: I think as the desires with day to day kind of anything goes in the closet and what we're really excited about is <unk>.

Speaker Change: New evolutions of the 501 in fabrics and fifth like the 500, Ninety's et cetera, and then driving the fashion pits, which right now it's all about baggy and loose, but at some point will it add to tapered and skinny.

Speaker Change: Following the Levi's brand to stand for something much broader than a great pair of jeans and you know as we look forward, we want to be an iconic apparel company rooted in denim and what that means is that we have permission to go into tops and dresses and skirts and outerwear and <unk>.

Speaker Change: I think as the desires with day to day kind of anything goes in the closet, but what we're really excited about is evolving the levi's brand to stand for something much broader than a great pair of jeans and as we look forward, we want to be an iconic apparel company rooted in denim.

Non denim bottoms, and we are seeing really encouraging traction on all those fronts. So if you take some of these categories well first winning with women is a key strategy. We're underpenetrated there I spoke to earlier, we're at 36% that business was up 12% for the quarter, 20% in DTC.

Speaker Change: And what that means is that we have permission to go into tops and dresses and skirts and outerwear and non denim bottoms and we are seeing really encouraging traction on all those fronts. So if you take some of these categories well first winning with women as a key strategy. We're underpenetrated there I spoke to earlier, we're at 36.

Speaker Change: And it feels like with that category, we're just getting started our tops business overall.

Was up 8% again feel very good on the trajectory that we're seeing we're seeing growth I think importantly, it's not just in what we consider our traditional tops categories like batwing Tee shirts, and trucker jackets, but we're seeing it in essential Tees in blouses in woven in buttoned down and.

Speaker Change: And that business was up 12% for the quarter, 20% in DTC.

Speaker Change: And it feels like with that category, we're just getting started our tops business overall.

Speaker Change: I said, we we had a great outerwear business this past quarter and into holiday.

Non denim bought the non denim bottoms category also.

Speaker Change: Doing very well both for women and men I think especially for men are Xx Chino platform, which we've had for a couple of years that continues to grow and resonate our tech Pant platform introduced first is a five pocket now as a chino and we're introducing this year an elevated call it tier two and more to come.

Speaker Change: Like I said, we we had a great outerwear business this past quarter and into holiday.

Speaker Change: Non denim bought the non denim bottoms category also.

Speaker Change: Doing very well both for women and men I think especially for men are Xx Chino platform, which we've had for a couple of years that continues to grow and resonate our tech Pant platform introduced first is a five pocket now as the Chino and we're introducing this year an elevated call it tier two and more to come.

So I think when you hear from me is that we are really significantly broadening our addressable market for the total.

Speaker Change: Just to give you context, when we look at all things outside of denim bottoms, that's about 40% of our business and growing and I think especially for the if you just think about the Tox piece think about DTC, it's a great attachment purchase drive <unk>.

Speaker Change: So I think when you hear from me is that.

Speaker Change: A really significantly broadening our adjustable market for the total.

Speaker Change: Drive average ticket and what years ago.

Speaker Change: Just to give you context.

Speaker Change: When we look at all things outside of denim bottoms, that's about now 40% of our business and growing and I think especially for the if you just think about the tox piece.

Yeah, you know many years ago, our ratio of bottoms to tops used to be like 7% to one <unk>.

Speaker Change: Right now we're trending at two to one to top everyone bottom and at some point, that's going to be one to one or frankly, even more top to every bought them because we know from consumers know by more tops and bottoms. So so.

Speaker Change: Think about DTC, it's a great attachment purchase drive <unk>.

Speaker Change: <unk> average ticket and what years ago.

Speaker Change: So, we're making really great progress on that front.

Speaker Change: Many years ago, our ratio of bottoms to tops used to be like 7% to one right now we're trending at two to one to tops to everyone bottom and at some point, that's going to be one to one or frankly, even more top to every bought them because we know from consumers they'll buy more tops and bottoms. So.

Speaker Change: Yeah, and so I think Q4 is it.

Speaker Change: Many proof points and that gives us confidence many of these strategies in place for 2025.

Speaker Change: Super helpful. Thank you for that perspective.

Speaker Change: Great.

Speaker Change: Thank you. Our next question comes from the line of Mike <unk>.

Speaker Change: So, we're making really great progress on that front.

Speaker Change: Wells Fargo. Your question please.

Speaker Change: Yeah, and so I. Thank you for the.

Speaker Change: Okay.

Speaker Change: Many proof points and that gives us confidence many of these strategies in place for 2025.

Speaker Change: And everyone.

Speaker Change: <unk> I guess most have been asked but just to clarify a few things. So on dockers. So it looks like it's like a $325 million of business can you just comment on the profitability of last year with it making any money just so we know.

Speaker Change: Super helpful. Thank you for that perspective.

Great.

Speaker Change: Thank you. Our next question comes from the line of Mike <unk>.

Speaker Change: But when the sale does go through what you expect and then on some of the headwinds you've kind of laid out can you just.

Speaker Change: As Fargo your question please.

Speaker Change: Hey.

Everyone Hermes.

Speaker Change: <unk> I guess most have been asked but just to clarify a few things. So on dockers. So it looks like it's like a $325 million business can you just comment on the profitability as of last year that making any money just so we know.

Speaker Change: Yes.

Just give a little bit more clarity on what's going on with denizen and you mentioned footwear.

Speaker Change: Maybe I don't maybe I should I don't really understand what's going on with footwear and then I thought denizen had kind of been worked through at this point. So again, just trying to understand the sizes of those and what's going on I'm sure. So.

Speaker Change: But when the sale kind of let's go through what to expect and then on some of the headwinds you've kind of laid out can you just.

Speaker Change: Yes.

Speaker Change: Just for everybody's benefit and our publicly said this.

Speaker Change: Just give a little bit more clarity on what's going on with denizen and you mentioned footwear.

Speaker Change: In our press release, we have given details of.

Speaker Change: Denizen.

Speaker Change: The LSA.

Speaker Change: And the 53rd week, we have given it.

Speaker Change: For the company, we have given it by <unk>.

Speaker Change: Just for everybody's benefit and our publicly said this.

Segment, and we're giving it by channel. So you guys should have it.

In our press release, we have given details of.

And that's why we focus on the organic growth.

Because to your question I denizen the exits started.

Speaker Change: Denizen.

Speaker Change: The LSA.

Speaker Change: And the 53rd week, we've given it.

Speaker Change: In the beginning of 2004, and we believe most of it.

Speaker Change: For the company, we have given it by <unk>.

We have exited.

Speaker Change: Segment, and we've given it by channel. So you guys should have it.

Speaker Change: We believe there's about $30 million, which will exit by the end of the first half of this year.

Speaker Change: And that's why we focus on the organic growth.

Speaker Change: Because to your question I denizen the exits started.

Speaker Change: Footwear, we had a small footwear business.

Speaker Change: Really based out of Europe.

Speaker Change: In the beginning of 'twenty, four and we believe most of it.

Speaker Change: And again, we felt it was not strategic and so.

Speaker Change: We have exited.

Speaker Change: We have announced the exit it'll impact largely 25.

Speaker Change: We believe there's about $30 million, which will exit by the end of the first half of this year.

Speaker Change: The size of that is about a point in revenue, which is 60 to 65 million something like that the exact numbers you'll have there.

Speaker Change: Footwear, we had a small footwear business.

Speaker Change: Really based out of Europe.

Speaker Change: And that's why we felt it important to.

Speaker Change: And again, we felt it was not strategic and so.

Speaker Change: Move to an organic revenue growth because that.

Speaker Change: Explains the intrinsic.

Speaker Change: We have announced the exit it'll impact largely 25.

Speaker Change: A business that is lift and will grow over time to your question about dog, because you're right, it's about $330 million in revenue.

Speaker Change: The size of that is about a point and revenue was $60 65 million something like that the exact numbers you'll have there.

Speaker Change: The gross margin are in the high Forty's the EBIT margins.

Speaker Change: And that's why we felt it important to.

Speaker Change: Move to an organic revenue growth because.

Speaker Change: <unk> base is probably breakeven.

Speaker Change: Explains the intrinsic.

Speaker Change: So that's the business that.

Speaker Change: Business that is left and will grow over time to your question about dog, because you're right, it's about $330 million in revenue.

Speaker Change: Just for everybody's perspective.

Speaker Change: We're in the process the process is going well and we are confident.

Speaker Change: That will be able to sell this business sometime in 'twenty five.

Speaker Change: Gross margin in the high forties.

Speaker Change: EBIT margins in an allocated basis is probably breakeven.

Speaker Change: Thanks, Amit.

Amit: You're welcome.

Speaker Change: Thanks, everyone for joining the call today, and we look forward to seeing many of you at our product preview event Tomorrow evening.

Speaker Change: And so that's the business that.

Speaker Change: Just for everybody's perspective.

Speaker Change: We are in a process the process is going well and we are confident.

Amit: Thank you.

Amit: This concludes today's conference call. Please disconnect your lines at this time.

Speaker Change: That will be able to sell this business sometime in 'twenty five.

Amit: Yeah.

Amit: Thanks, Amit.

Speaker Change: Youre welcome.

Speaker Change: Thanks, everyone for joining the call today, and we look forward to seeing many of you at our product preview event Tomorrow evening.

Speaker Change: Thank you.

Speaker Change: This concludes today's conference call. Please disconnect your lines at this time.

Speaker Change: Okay.

[music].

Okay.

Speaker Change: Okay.

Speaker Change: [music].

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