Q3 2025 Levi Strauss & Co Earnings Call

Aida Orphan: Good day, ladies and gentlemen, and welcome to the Levi Strauss & Co. third quarter fiscal 2025 earnings conference call for the period ending August 31, 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 company's website, levistrauss.com. I would now like to turn the call over to Aida Orphan, Vice President of Investor Relations at Levi Strauss & Co.

Speaker #2: Good day, ladies and gentlemen, and welcome to the Levi Strauss & Co 3rd Quarter's fiscal 2025 earnings conference call for the period ending August 31st, 2025.

Speaker #2: 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.

Speaker #2: This conference call is being broadcast over the internet and a replay of the webcast will be accessible for one quarter on the company's website leviestrauss.com.

Speaker #2: I would now like to turn the call over to Aida Orphan, Vice President of Investor Relations at Levi Strauss & Co.

[Company Representative]: Thank you for joining us on the call today to discuss the results for our third quarter fiscal 2025. Joining me on today's call are Michelle Gass, our President and CEO, and Harmit Singh, our Chief Financial and Growth Officer. We'd like to remind you that we will be making forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in our reports filed with the SEC. We assume no obligation to update any of these forward-looking statements. Additionally, during this call, we will discuss certain non-GAAP financial measures which are not intended to be a substitute for our GAAP results. Definitions of these measures and reconciliations to their most comparable GAAP measure are included in our earnings release available on the IR section of our website, investors.levistrauss.com.

Speaker #3: Thank you for joining us on the call today to discuss the results for our third quarter fiscal 2025. Joining me on today's call are Michelle Gass, our President and CEO, and Harmit Singh, our Chief Financial and Growth Officer.

Speaker #3: We'd like to remind you that we will be making forward-looking statements based on current expectations and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially.

Speaker #3: These risks and uncertainties are detailed in our reports filed with the SEC. We assume no obligation to update any of these forward-looking statements. Additionally, during this call, we will discuss certain non-GAAP financial measures, which are not intended to be a substitute for our GAAP results.

Speaker #3: Definitions of these measures and reconciliations to their most comparable GAAP measure are included in our earnings release, available on the IR section of our website, investors.leviestrauss.com.

[Company Representative]: Please note that Michelle and Harmit will be referencing organic net revenues or constant currency numbers unless otherwise noted, and the information provided is based on continuing operations. Finally, this call is being webcast on our IR website, and a replay of this call will be available on the website shortly. 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. Now I'd like to turn the call over to Michelle.

Speaker #3: Please note that Michelle and Harmit will be referencing organic net revenues or constant currency numbers unless otherwise noted, and the information provided is based on continuing operations.

Speaker #3: Finally, this call is being webcast on our IR website and a replay of this call will be available on the website shortly. 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.

Speaker #3: And now I'd like to turn the call over to Michelle.

Michelle Gass: Thank you and welcome, everyone. What I'll share today builds on the themes I've been emphasizing this year as we pivot to become a DTC-first, head-to-toe denim lifestyle retailer. The consistent execution of our strategic priority is driving a meaningful inflection in our financial performance. Today, I'm pleased to share that we delivered another very strong quarter with upside across the P&L, giving us the confidence to raise our full-year revenue and EPS guidance. In Q3, we delivered our fourth consecutive quarter of high single-digit organic revenue growth. Strength was once again broad-based across our business, including DTC and wholesale, international and domestic, women's and men's, and tops and bottoms. Our growth was led by continued strong sales and profitability in our direct-to-consumer channel, up 9%, fueled by strong comp growth as well as solid performance in global wholesale.

Speaker #4: Thank you and welcome everyone. What I'll share today builds on the themes I've been emphasizing this year as we pivot to become a DGC-first, head-to-toe denim lifestyle retailer.

Speaker #4: The consistent execution of our strategic priorities is driving a meaningful inflection in our financial performance. And today, I'm pleased to share that we delivered another very strong quarter with upside across the P&L, giving us the confidence to raise our full-year revenue and EPS guidance.

Speaker #4: In Q3, we delivered our fourth consecutive quarter of high single-digit organic revenue growth. Strength was once again broad-based across our business, including DTC and wholesale, international and domestic, women's and men, and tops and bottoms.

Speaker #4: Our growth was led by continued strong sales and profitability in our direct-to-consumer channel, up 9%, fueled by strong comp growth as well as solid performance in global wholesale.

Michelle Gass: Our largest market, the U.S., grew 3%, and our international business was up 9%, led by an acceleration in Asia. We continue to see robust performance in our core, as well as outside growth in our key focus areas like women's and tops. The results we've delivered this quarter, against an increasingly complex backdrop, are yet another proof point that our strategies are working. Looking ahead, there are several factors that give me even more conviction that our momentum will continue. First, our narrowed focus enables us to maximize the full potential of the Levi's brand. We will continue to build momentum through impactful marketing campaigns, strategic partnerships, and innovative collaborations, ensuring that the brand remains firmly at the center of culture. Second, the total addressable market for denim is large and growing as consumer preferences continue to shift towards casualization.

Speaker #4: Our largest market, the US, grew 3%, and our international business was up 9%, led by an acceleration in Asia. And we continue to see robust performance in our core as well as outsized growth in our key focus areas like women's and tops.

Speaker #4: The results we've delivered this quarter, against an increasingly complex backdrop, are yet another proof point that our strategies are working. Looking ahead, there are several factors that give me even more conviction that our momentum will continue.

Speaker #4: First, our narrowed focus enables us to maximize the full potential of the Levi's brand. We will continue to build momentum through impactful marketing campaigns, strategic partnerships, and innovative collaborations.

Speaker #4: Ensuring that the brand remains firmly at the center of culture. Second, the total addressable market for denim is large and growing, as consumer preferences continue to shift towards casualization.

Michelle Gass: As the definitive market leader, we are well positioned to take advantage and drive growth. Third, our denim leadership puts us in a prime position to define and own head-to-toe denim lifestyle, further expanding our addressable market. As we drive this momentum forward, we'll continue to deliver an innovative and robust product pipeline across genders and categories. Fourth, our DTC-first strategy is bringing us closer to the consumer and generating consistent and significant growth, while we have also stabilized and grown our wholesale business. Both channels are seeing strong improvements in profitability. Fifth, while international already comprises nearly 60% of our total business, there are still untapped opportunities for us to grow, particularly in Asia, where our business has momentum and the opportunity for continued expansion is considerable.

Speaker #4: As the definitive market leader, we are well-positioned to take advantage and drive growth. Third, our denim leadership puts us in a prime position to define and own head-to-toe denim lifestyle, further expanding our addressable market.

Speaker #4: As we drive this momentum forward, we'll continue to deliver an innovative and robust product pipeline across genders and categories. Fourth, our DTC-first strategy is bringing us closer to the consumer and generating consistent and significant growth, while we have also stabilized and grown our wholesale business.

Speaker #4: Both channels are seeing strong improvements in profitability. Fifth, while international already comprises nearly 60% of our total business, there are still untapped opportunities for us to grow, particularly in Asia, where our business has momentum and the opportunity for continued expansion is considerable.

Michelle Gass: Underpinning all of this is our culture of performance, with a sharpened focus on operating with rigor and executing with excellence, from go-to-market efficiencies and more productive store operations to end-to-end supply chain improvements. I will now turn to highlights from the third quarter in the context of our strategies. All numbers that Harmit and I will reference are on an organic continuing operations basis. Let's start with our first strategy, being brand-led. Levi's had another strong quarter of growth. In the quarter, we launched the final chapter of the Reimagine campaign with Beyoncé. This campaign delivered as intended, fueling momentum across the business, specifically driving growth in our Levi's women's business, up 12% year to date. In August, we debuted our new global campaign starring Shaboozey, underscoring our relevancy and authenticity with men.

Speaker #4: Underpinning all of this is our culture of performance, with a sharpened focus on operating with rigor and executing with excellence—from go-to-market efficiencies and more productive store operations to end-to-end supply chain improvements.

Speaker #4: I will now turn to highlights from the third quarter in the context of our strategies. All numbers that Harmit and I will reference are on an organic, continuing operations basis.

Speaker #4: Let's start with our first strategy, being brand-led. Levi's had another strong quarter of growth. In the quarter, we launched the final chapter of the reimagined campaign with Beyoncé.

Speaker #4: This campaign delivered as intended, fueling momentum across the business, specifically driving growth in our Levi's women's business, up 12% year to date. In August, we debuted our new global campaign starring Shaboozee, underscoring our relevancy and authenticity with men.

Michelle Gass: The campaign showcases our most iconic products: the 501, the trucker jacket, and the Western shirt, and we're pleased with how this campaign is being received by our fans. In addition, we also cultivated enthusiasm for the brand through a broad range of collaborations, including a joint collection with Nike, fusing Levi's heritage denim craftsmanship with Nike's athletic sneaker culture. Our collaborations generate brand heat and introduce Levi's to new consumers. Just this week, we launched a special collection with Toy Story in celebration of their 30th anniversary. Turning to product, our evolution to a head-to-toe denim lifestyle retailer continues to gain momentum, all while strengthening our position as the global authority in denim. Our Levi's women's business continues to deliver outsized growth, up 9% in Q3, while our leading Levi's men's business grew a solid 5%.

Speaker #4: The campaign showcases our most iconic products: the 501, the trucker jacket, and the Western shirt. We’re pleased with how this campaign is being received by our fans.

Speaker #4: In addition, we also cultivated enthusiasm for the brand through a broad range of collaborations, including a joint collection with Nike that fuses Levi's heritage denim craftsmanship with Nike's athletic sneaker culture.

Speaker #4: Our collaborations generate brand heat and introduce Levi's to new consumers. Just this week, we launched a special collection with Toy Story in celebration of their 30th anniversary.

Speaker #4: Turning to product, our evolution to a head-to-toe denim lifestyle retailer continues to gain momentum, all while strengthening our position as the global authority in denim.

Speaker #4: Our Levi's women's business continues to deliver outsized growth, up 9% in Q3, while our leading Levi's men's business grew a solid 5%. Driven by our diversified fit portfolio, we saw strong growth in our bottoms business, which was up 6%.

Michelle Gass: Driven by our diversified fit portfolio, we saw strong growth in our bottoms business, which was up 6%. We're continuing to inject newness into the looser fit trend with the new baggy utility silhouettes for him and the launch of our baggy dad barrel for her. We're driving a revival in low rise with our low and super low collection of fits, which are delivering strong growth. As we evolve into denim lifestyle, we're making meaningful progress on our seasonally relevant assortments as consumers look for more buy-now, wear-now products. Following last year's reset, tops continued to drive notable growth, up 9%, with strength across women's and men's. For the quarter, our shorts business delivered strong growth across genders. We continue to infuse newness into the assortment through fit and fabric innovations, from our linen blend styles to the launch of the 501 curve.

Speaker #4: We're continuing to inject newness into the looser fit trend with the new baggy utility silhouettes for him and the launch of our baggy dad barrel for her.

Speaker #4: And we're driving a revival in low-rise with our low and super-low collection of fits, which are delivering strong growth. As we evolve into denim lifestyle, we're making meaningful progress on our seasonally relevant assortments, as consumers look for more buy now, wear now products.

Speaker #4: Following last year's reset, tops continue to drive notable growth, up 9%, with strength across women's and men's. For the quarter, our shorts business delivered strong growth across genders.

Speaker #4: We continue to infuse newness into the assortment through fit and fabric innovation, from our linen blend styles to the launch of the 501 Curve.

Michelle Gass: With respect to our premiumization efforts, we began to roll out our elevated Blue Tab collection to Europe in early September, following a successful launch in Asia and the U.S. earlier this year. Blue Tab merges Levi's iconic aesthetic with the refined quality and thoughtful Japanese craftsmanship. Looking to the holiday season, we are well positioned with the right merchandise assortment and the right marketing campaigns. We're expanding the range of occasions and amplifying the many ways that fans can embrace our denim lifestyle assortment through elevated fabrics, textures, and embellishments. We're excited to showcase Levi's through a fresh lens that reflects the season's full spectrum of style. Now shifting to our strategy to be DTC-first. Global direct-to-consumer sales were up 9%, driven by strong performance in both our stores and online.

Speaker #4: And with respect to our premiumization efforts, we began to roll out our elevated Blue Tab collection to Europe in early September, following a successful launch in Asia and the U.S. earlier this year.

Speaker #4: Blue Tab merges Levi's iconic aesthetic with the refined quality and thoughtful Japanese craftsmanship. Looking to the holiday season, we are well-positioned with the right merchandise assortment and the right marketing campaigns.

Speaker #4: We're expanding the range of occasions and amplifying the many ways that fans can embrace our denim lifestyle assortment through elevated fabrics, textures, and embellishments.

Speaker #4: We're excited to showcase Levi's through a fresh lens that reflects the season's full spectrum of style. Now shifting to our strategy to be DTC-first.

Speaker #4: Global direct-to-consumer sales were up 9%, driven by strong performance in both our stores and online. We generated high-single-digit comp growth fueled by higher UPT, AUR, and full-price selling, as our expanded denim lifestyle assortment continues to resonate with our consumers around the world.

Michelle Gass: We generated high single-digit comp growth fueled by higher UPT, AUR, and full price selling as our expanded denim lifestyle assortment continues to resonate with our consumers around the world. As we continue to grow our DTC channel, we remain focused on doing so profitably with our productivity initiatives resulting in more than 400 basis points of margin expansion in the quarter. We're pleased with the strong results from our store optimization initiatives, which have improved both the consumer experience and store productivity. We've enhanced our in-store lifestyle merchandising to make the store environment more inspiring and shoppable, highlighting our broader assortment of head-to-toe looks. We've also been focused on improving our assortment planning and lifecycle management, resulting in lower promotions and higher full price selling.

Speaker #4: And as we continue to grow our DTC channel, we remain focused on doing so profitably, with our productivity initiatives resulting in more than 400 basis points of margin expansion in the quarter.

Speaker #4: We're pleased with the strong results from our store optimization initiatives, which have improved both the consumer experience and store productivity. We've enhanced our in-store lifestyle merchandising to make the store environment more inspiring and shoppable, highlighting our broader assortment of head-to-toe looks.

Speaker #4: We've also been focused on improving our assortment planning and lifecycle management, resulting in lower promotions and higher full-price selling. Additionally, we're in the process of rolling out a new global selling model for our store teams, which, coupled with our enhanced labor scheduling system, is improving the consumer experience and delivering operational efficiencies.

Michelle Gass: Additionally, we're in the process of rolling out a new global selling model for our store team, which, coupled with our enhanced labor scheduling system, is improving the consumer experience and delivering operational efficiencies. We had another quarter of very strong growth in e-comm, up 16%, driven by an increase in traffic across all segments. We expect e-commerce to continue to be our fastest growing channel on the path to comprising 15% of our total business, up from just 9% today. In our wholesale channel, net revenues were up 5%, reflecting growth across all segments. In the U.S., the Levi's brands were up 2% as we continue to invest in top doors and expand and elevate our assortments. Western wear is core to who we are, and we're pleased to have recently expanded our product assortment with Boot Barn and gained new distribution at Cavenders.

Speaker #4: We had another quarter of very strong growth in e-commerce, up 16%, driven by an increase in traffic across all segments. We expect e-commerce to continue to be our fastest-growing channel on the path to comprising 15% of our total business, up from just 9% today.

Speaker #4: In our wholesale channel, net revenues were up 5%, reflecting growth across all segments. In the U.S., the Levi's brands were up 2% as we continue to invest in top drawers and expand and elevate our assortments.

Speaker #4: Western wear is core to who we are, and we're pleased to have recently expanded our product assortment with Boot Barns and gained new distribution at Cavender's.

Michelle Gass: We also see opportunities to increase our penetration with premium and specialty accounts as we broaden and elevate our lifestyle assortment. Now turning to our third strategy, powering the portfolio, our international business grew 9% in Q3. Asia accelerated in the quarter, driven by double-digit growth in key markets like India, Japan, Korea, and Turkey. I recently visited several stores across India, Korea, and Japan, and it is clear that consumers are responding to the work we've done to ensure the best expression of our denim lifestyle assortment. Japan, in particular, is a market with a very high bar for denim. We've been investing in Japan over the past decade, transitioning the market from primarily a wholesale business to now close to 75% DTC.

Speaker #4: We also see opportunities to increase our penetration with premium and specialty accounts as we broaden and elevate our lifestyle assortments. Now turning to our third strategy, powering the portfolio, our international business grew 9% in Q3.

Speaker #4: Asia accelerated in the quarter, driven by double-digit growth in key markets like India, Japan, Korea, and Turkey. I recently visited several stores across India, Korea, and Japan, and it is clear that consumers are responding to the work we've done to ensure the best expression of our denim lifestyle assortment.

Speaker #4: Japan, in particular, is a market with a very high bar for denim. We've been investing in Japan over the past decade, transitioning the market from primarily a wholesale business to now close to 75% DTC.

Michelle Gass: Walking our stores in Nagoya, Shinjuku, and Harajuku, which are some of our highest volume stores in the world, you'll see the fullest and most premium expression of the Levi's brand. Up almost 50% since 2019 and continuing to gain momentum, we remain optimistic about future opportunities in Japan, and we will replicate our successful playbook in this market across the globe. Beyond Yoga was up 2%, and DTC was up 22%, driven by comps, new doors, and e-commerce. Growth in DTC was offset by a decline in wholesale as the team focuses on higher quality sales in the channel. Looking to Q4, we have additional stores opening in Boston, Houston, and two more stores in Northern California, bringing our total store count to 14. We expect Beyond Yoga to end the year up low teens versus prior year.

Speaker #4: Walking through our stores in Nagoya, Shinjuku, and Harajuku, which are some of our highest-volume stores in the world, you'll see the fullest and most premium expression of the Levi's brand.

Speaker #4: Up almost 50% since 2019, and continuing to gain momentum, we remain optimistic about future opportunities in Japan. We will replicate our successful playbook in this market across the globe.

Speaker #4: Beyond Yoga was up 2%, and DTC was up 23%, driven by comps, new doors, and e-commerce. Growth in DTC was offset by a decline in wholesale as the team focuses on higher-quality sales in the channel.

Speaker #4: Looking to Q4, we have additional stores opening in Boston, Houston, and two more stores in Northern California, bringing our total store count to 14.

Speaker #4: We expect Beyond Yoga to end the year up in the low teens versus the prior year. In closing, we delivered another standout quarter with sales and earnings growth that positions us to increase our outlook for the year.

Michelle Gass: In closing, we delivered another standout quarter with sales and earnings growth that positions us to increase our outlook for the year. We are fully prepared and well positioned for holidays as we enter the season with momentum. Despite an increasingly uncertain external backdrop, we have several tailwinds that give me confidence in not only delivering a strong finish to 2025, but also another strong year in 2026. I would like to thank our incredible, talented, and passionate team for driving our transformation into the world's denim lifestyle leader and delivering outstanding service to our fans every day. With that, I will turn it over to Harmit to provide a financial overview of the quarter and our expectations for the remainder of the year. Harmit?

Speaker #4: We are fully prepared and well-positioned for the holiday, as we enter the season with momentum. Despite an increasingly uncertain external backdrop, we have several tailwinds that give me confidence, not only in delivering a strong finish to 2025, but also in achieving another strong year in 2026.

Speaker #4: Finally, I'd like to thank our incredibly talented and passionate teams for driving our transformation into the world's denim lifestyle leader and delivering outstanding service to our fans every day.

Speaker #4: And with that, I will turn it over to Harmit to provide a financial overview of the quarter and our expectations for the remainder of the year.

Speaker #4: Harmit,

Harmit Singh: Thanks, Michelle. In Q3, we delivered strong financial results exceeding expectations across sales, gross margin, EBIT margin, and EPS. We remain focused on establishing a strong track record of consistent execution and results. The strategic transformation across our organization has enabled us to evolve into a higher-performing company with stronger revenue growth, expanded margins, improved cash flows, and higher returns on invested capital. Given the outperformance in Q3 and continued strong trends, we are also raising our revenue and EPS outlook for the year, despite incorporating higher tariffs than assumed in our previous guidance. Now turning to our Q3 results, net revenue grew 7%, reflecting the power of our diversified business model. International markets drove approximately 75% of our growth, and the U.S. contributed 25%. This international strength reflects our continued expansion and brand resonance in key markets globally, while our U.S. business maintained solid underlying momentum.

Speaker #2: Thanks, Michelle. In Q3, we delivered strong financial results exceeding expectations across sales, gross margin, EBIT margin, and EPS. We remain focused on establishing a strong track record of consistent execution and results.

Speaker #2: The strategic transformation across our organization has enabled us to evolve into a higher-performing company with stronger revenue growth, expanded margins, improved cash flows, and higher returns on invested capital.

Speaker #2: Given the outperformance in Q3 and continued strong trends, we are also raising our revenue and EPS outlook for the year, despite incorporating higher tariffs than assumed in our previous guidance.

Speaker #2: Now turning to our Q3 results, net revenue grew 7%, reflecting the power of our diversified business model. International markets drove approximately 75% of our growth, while the U.S. contributed 25%.

Speaker #2: This international strength reflects our continued expansion and brand resonance in key markets globally, while our U.S. business maintained solid underlying momentum. By channel, growth was evenly balanced between wholesale and direct-to-consumer, each growing and contributing roughly 50% of our revenue increase.

Harmit Singh: By channel, growth was evenly balanced between wholesale and direct-to-consumer, each growing and contributing roughly 50% of our revenue increase. This balanced performance underscores the success of our DTC-first strategy while maintaining strong partnerships in wholesale. By gender, women's contributed approximately 40% of our growth, with men's accounting for the balance. We continue to execute against our strategy to capture greater share in our underpenetrated, higher gross margin women's segment, while our large men's business continues to generate solid growth as we fuel momentum in the category. Turning to gross margin performance, we delivered another strong quarter with a Q3 record gross margin of 61.7% of net revenues, expanding 110 basis points versus the prior year, more than offsetting 80 basis points of tariff headwind. Three key drivers fuel the continued expansion.

Speaker #2: This balanced performance underscores the success of our DTC-first strategy while maintaining strong partnerships in wholesale. By gender, women's contributed approximately 40% of our growth, with men's accounting for the balance.

Speaker #2: We continued to execute against our strategy to capture greater share in our under-penetrated, higher gross margin women's segment, while our large men's business continues to generate solid growth as we fuel momentum in the category.

Speaker #2: Turning to gross margin performance, we delivered another strong quarter with a Q3 record gross margin of 61.7% of net revenues, expanding 110 basis points versus the prior year.

Speaker #2: More than offsetting 80 basis points of tariff headwinds, three key drivers fueled the continued expansion. First, our structural business mix continues to evolve favorably, with the accelerating shift towards higher-margin DTC, international, and women's categories.

Harmit Singh: First, our structural business mix continues to evolve favorably with the accelerating shift towards higher margin DTC, international, and women's categories. Second, targeted pricing actions we have taken across our assortment, as well as higher full price selling and reduced promotional levels in our direct-to-consumer channel as consumers continue to gravitate towards newness. Third, approximately 50 basis points of the upside in gross margin was driven by foreign exchange. While we are judiciously approaching pricing opportunities across our business, in Q3, we saw a significant increase in units, demonstrating healthy underlying demand for our brand. I'm pleased to report that our adjusted SG&A performance came in line with our expectations, representing less than 50% of total revenue, over 150 basis points improvement from our first half run rate.

Speaker #2: Second, targeted pricing actions we have taken across our assortment, as well as higher full-price selling and reduced promotional levels in our direct-to-consumer channel, as consumers continue to gravitate towards newness.

Speaker #2: Third, approximately 50 basis points of the upside in gross margin was driven by foreign exchange. While we are judiciously approaching pricing opportunities across our business in Q3, we saw a significant increase in units, demonstrating healthy underlying demand for our brand.

Speaker #2: I'm pleased to report that our adjusted SG&A performance came in line with our expectations, representing less than 50% of total revenue. This reflects over a 150 basis points improvement from our first half run rate.

Harmit Singh: The primary factors contributing to the increase in SG&A dollars include higher performance-based compensation, given the momentum in our business, costs associated with our store opening, as well as expenses associated with the transformation of our distribution networks. The combination of robust gross margin and our disciplined approach to SG&A management delivered an adjusted EBIT margin of 11.8% and generated $0.34 of adjusted diluted EPS, both ahead of our expectations. Our focus on profitability as we accelerate growth has enabled us to grow both adjusted EBIT and adjusted diluted EPS up approximately 25% to prior year on a year-to-date basis. Now let's review the key highlights by segment. The Americas' net revenues were up 7%. Our U.S. business was up 3%, delivering our fifth consecutive quarter of strong growth. DTC grew 6% and now represents over 40% of the U.S. market. U.S.

Speaker #2: The primary factors contributing to the increase in SG&A dollars include higher performance-based compensation given the momentum in our business, costs associated with our store openings, as well as expenses associated with the transformation of our distribution network.

Speaker #2: The combination of robust gross margin and our disciplined approach to SG&A management delivered an adjusted EBIT margin of 11.8% and generated 34 cents of adjusted diluted EPS.

Speaker #2: Both ahead of our expectations. Our focus on profitability as we accelerate growth has enabled us to grow both adjusted EBIT and adjusted diluted EPS up approximately 25% to prior year on a year-to-date basis. Now, let's review the key highlights by segment.

Speaker #2: The Americas' net revenues were up 7%. Our U.S. business was up 3%, delivering our fifth consecutive quarter of strong growth. DTC grew 6% and now represents over 40% of the U.S. market.

Harmit Singh: wholesale net revenues were also up despite the challenges posed by the transition of our U.S. distribution centers. Driven by broad-based strength across the region, LATAM has seen several consecutive quarters of double-digit growth, including Q3, which was up 23%. Americas' operating margin expanded 50 basis points, driven by gross margin and revenue leverage. Europe's net revenues were up 3%. All key markets delivered growth, led by a very strong performance in the UK. While weather impacted footfall in June and July, we exited the quarter with strong performance in August, and we continue to expect mid single-digit growth in Europe for the year. Operating margin grew 80 basis points versus the prior year from strong gross margin expansion. Asia's net revenues accelerated to up 12%. The segment saw double-digit growth in both DTC and wholesale. Operating margin increased 50 basis points to prior year.

Speaker #2: U.S. wholesale net revenues were also up, despite the challenges posed by the transition of our U.S. distribution centers. Driven by broad-based strength across the region, LATAM has seen several consecutive quarters of double-digit growth, including Q3, which was up 23%.

Speaker #2: America's operating margin expanded by 50 basis points, driven by gross margin and revenue leverage. Europe's net revenues were up 3%; all key markets delivered growth, led by a very strong performance in the UK.

Speaker #2: While weather impacted footfall in June and July, we exited the quarter with strong performance in August, and we continue to expect mid-single-digit growth in Europe for the year.

Speaker #2: Operating margin grew 80 basis points versus the prior year, driven by strong gross margin expansion. Asia's net revenues accelerated to up 12%, with the segment seeing double-digit growth in both DTC and wholesale.

Speaker #2: Operating margin increased 50 basis points compared to the prior year. Asia is up 8% on a year-to-date basis, and operating margin for the year is up 40 basis points compared to the prior year.

Harmit Singh: Asia is up 8% on a year-to-date basis, and operating margin for the year is up 40 basis points to prior year. Turning to our shareholder returns program and the balance sheet. In the quarter, we returned $151 million to shareholders, a 118% increase versus last year. We've also closed the first phase of the Dockers sale, and with the proceeds, we have implemented a $120 million accelerated share repurchase program and retired approximately 5 million shares, with the remaining shares to be settled by the first quarter of 2026. We have returned $283 million to shareholders year to date, which is substantially higher than our annual cash payout target. For Q4, we declared a dividend of $0.14 per share, which is up 8% to prior year.

Speaker #2: Turning to our shareholder returns program and the balance sheet, in the quarter we returned $151 million to shareholders, a 118% increase versus last year.

Speaker #2: We've also closed the first phase of the Docker sale. With the proceeds, we have implemented a $120 million accelerated share repurchase program and retired approximately 5 million shares, with the remaining shares to be settled by the first quarter of 2026.

Speaker #2: We have returned $283 million to shareholders year-to-date, which is substantially higher than our annual cash payout target. For Q4, we declared a dividend of $0.14 per share, which is up 8% from the prior year.

Harmit Singh: We ended the quarter with reported inventory dollars up 12%, driven by purposeful investments ahead of the holiday and higher product costs than a year ago due to tariffs. In unit terms, inventory was up 8% versus last year. As of today, we have 70% of the product in the U.S. needed for holiday. Before turning to guidance, let me briefly share our updated assumptions around tariffs. Our updated guidance reflects the latest tariff rates, which include 30% for China and an increase to approximately 20% for the rest of the world. This is higher than our last assumption, and as a result, we estimate the full-year growth impact of tariffs before mitigation to be approximately a 70 basis point headwind to gross margin compared to 50 basis points previously.

Speaker #2: We ended the quarter with reported inventory dollars up 12%, driven by purposeful investments ahead of the holiday and higher product costs than a year ago due to tariffs.

Speaker #2: In unit terms, inventory was up 8% versus last year. As of today, we have 70% of the product in the U.S. needed for the holiday.

Speaker #2: Before turning to guidance, let me briefly share our updated assumptions around tariffs. Our updated guidance reflects the latest tariff rates, which include 30% for China and an increase to approximately 20% for the rest of the world.

Speaker #2: This is higher than our last assumption, and as a result, we estimate the full-year gross impact of tariffs before mitigation to be approximately a 70 basis point headwind to gross margin, compared to 50 basis points previously.

Harmit Singh: However, given the Q3 results and after mitigation, we continue to expect only a 20 basis point impact to gross margin. This translates to a $0.02 to $0.03 impact to adjusted diluted EPS, unchanged from last quarter's guidance. As respects to Q4, this equates to an 80 basis point headwind to gross margin and a $0.03 impact to adjusted diluted EPS. Looking to 2026, we are continuing to take actions to offset the impact of tariffs. As a reminder, these mitigation initiatives include promotion optimization, targeted pricing action, vendor negotiation, and further supply chain diversification. Now I will turn to our outlook for Q4 and then cover the full year.

Speaker #2: However, given the Q3 results and after mitigation, we continue to expect only a 20 basis point impact to gross margin. This translates to a 2% to 3% impact on adjusted diluted EPS, unchanged from last quarter's guidance.

Speaker #2: As respects to Q4, this equates to an 80 basis points headwind to gross margin and a 3% impact to adjusted diluted EPS. Looking to 2026, we are continuing to take actions to offset the impact of tariffs.

Speaker #2: As a reminder, these mitigation initiatives include promotion optimization, targeted pricing actions, vendor negotiation, and further supply chain diversification. Now, I will turn to our outlook for Q4 and then cover the full year.

Harmit Singh: While we are taking a prudent approach to our outlook, given the complex macro environment and the absence of the 53rd week, which contributed four points to the top line in Q4 of 2024, we remain confident in the underlying strength and momentum of our business. In Q4, we expect organic net revenue growth to be up approximately 1%, and on a two-year stack, this equates to 9% organic growth. Reported net revenues are expected to be down approximately 3% because of non-comparable items, including the 53rd week, Denizen, and footwear, which are no longer included in the revenue base. Gross margin is expected to contract approximately 100 basis points in Q4, driven by tariffs as well as the impact of the 53rd week. We expect adjusted EBIT margin to be in the range of 12.4% to 12.6%.

Speaker #2: While we are taking a prudent approach to our outlook, given the complex macro environment and the absence of the 53rd week, which contributed 4 points to the top line in Q4 of 2024, we remain confident in the underlying strength and momentum of our business.

Speaker #2: In Q4, we expect organic net revenue growth to be up approximately 1%. On a two-year stack, this equates to 9% organic growth.

Speaker #2: Reported net revenues are expected to be down approximately 3% due to non-comparable items, including the 53rd week, Denizen, and footwear, which are no longer included in the revenue base.

Speaker #2: Gross margin is expected to contract approximately 100 basis points in Q4, driven by tariffs as well as the impact of the 53rd week.

Speaker #2: And we expect adjusted EBIT margin to be in the range of 12.4% to 12.6%. We expect the tax rate to be in the low 20s, higher than a year ago.

Harmit Singh: We expect the tax rate to be in the low 20s, higher than a year ago, and adjusted diluted EPS to be in the range of $0.36 to $0.38. For the full year, we are taking our revenues up by approximately a percentage point and EPS by $0.02. We now expect reported net revenue growth of approximately 3% for the year, and we have increased our expectations for organic net revenues to approximately 6%, up from prior year. We now expect gross margin to expand 100 basis points for the full year, up from the 80 basis points stated in our prior guidance, including the incremental drag from tariffs. We continue to expect adjusted SG&A as a percentage of revenue to end the year at around 50% and adjusted EBIT margin to be in the range of 11.4% to 11.6%.

Speaker #2: And adjusted diluted EPS to be in the range of $0.36 to $0.38. For the full year, we are taking our revenues up by approximately a percentage point and EPS by $0.02.

Speaker #2: We now expect reported net revenue growth of approximately 3% for the year, and we have increased our expectations for organic net revenues to approximately 6%, up from the prior year.

Speaker #2: We now expect gross margin to expand by 100 basis points for the full year, up from the 80 basis points stated in our prior guidance, including the incremental drag from tariffs.

Speaker #2: We continue to expect adjusted SG&A as a percentage of revenue to end the year at around 50%. Additionally, we anticipate adjusted EBIT margin to be in the range of 11.4% to 11.6%.

Harmit Singh: As we have previously shared, we continue to expect the tax rate to be about 23%, and we are raising our full-year adjusted diluted EPS range by $0.02 to $1.27 to $1.32 for the full year. In closing, our four consecutive quarters of high single-digit growth and raised revenue expectations underscore the strength and resilience of our business. As we accelerate profitable growth, we are transforming into a best-in-class DTC-first denim lifestyle retailer, unlocking new opportunities and delivering greater value for our shareholders. Our disciplined execution and agility have enabled us to deliver 14 consecutive quarters of DTC comp sales, expand margins, drive cash flow, and return significant capital to our shareholders, including the recent accelerated share repurchase program and our growing dividend. With our strategic focus on high growth segment, tops, women's, international, and DTC, we see a long runway of profitable growth ahead.

Speaker #2: As we have previously shared, we continue to expect the tax rate to be about 23%. We are raising our full-year adjusted diluted EPS range by $0.02 to $1.27 to $1.32 for the full year.

Speaker #2: In closing, our four consecutive quarters of high single-digit growth and raised revenue expectations underscore the strength and resilience of our business. As we accelerate profitable growth, we are transforming into a best-in-class DTC-first denim lifestyle retailer, unlocking new opportunities and delivering greater value for our shareholders.

Speaker #2: Our disciplined execution and agility have enabled us to deliver 14 consecutive quarters of DTC comp sales, expand margins, drive cash flow, and return significant capital to our shareholders.

Speaker #2: Including the recent ASR and our growing dividends, with our strategic focus on high-growth segments—tops, women's, international, and DTC—we see a long runway of profitable growth ahead.

Harmit Singh: Thank you for your continued trust and support. We are more confident than ever in our future. I will now open up the line for Q&A.

Speaker #2: Thank you for your continued trust and support. We are more confident than ever in our future. I will now open up the line for Q&A.

Aida Orphan: Thank you. The floor is now open for questions. If you have a question, please press star, then the numbers 11 on your telephone keypad. Due to time constraints, the company requests you ask only one question. If you have additional questions, please queue up again. If at any point your question has been answered, you may remove yourself from the queue by pressing star 11 again. Our first question comes from the line of Laurent Vasilescu of BNP Paribas. Please go ahead, Laurent.

Speaker #2: Thank you. The floor is now open for questions. If you have a question, please press star, then the numbers one, one on your telephone keypad.

Speaker #2: Due to time constraints, the company requests you ask only one question. If you have an additional question, please queue up again. If at any point your question has been answered, you may remove yourself from the queue by pressing star one, one again.

Speaker #2: Our first question comes from the line of Laurent Vasilescu, a BNP Paribas. Please go ahead, Laurent.

[Analyst]: Good afternoon, Michelle and Harmit. Thank you very much for taking my question. I wanted to ask about your European momentum. We had a major U.S. brand caution about the European marketplace the other week again around increased promotionality. Curious to hear what you're seeing in this important marketplace. How do your European pre-books look for next spring? Harmit, just on the Q4 guide, the gross margin down 100 basis points, can you maybe just unpack that a little bit more? What's the 53rd week impact on the GM, and what are the positive offsets? Thank you very much.

Speaker #5: Good afternoon, Michelle and Harmit. Thank you very much for taking my question. I wanted to ask about your European momentum. We had a major U.S. brand caution regarding the European marketplace the other week.

Speaker #5: Again, around increased promotionality. Curious to hear what you're seeing in this important marketplace. How do your European pre-books look for next spring?

Speaker #5: And then, Harmit, just on the 4Q guide, the gross margin down 100 basis points. Can you maybe just unpack that a little bit more?

Speaker #5: What's the 53rd week impact on the GM, and what are the positive assets? Thank you very much.

Harmit Singh: Sure. Laurent, thanks for calling in. Europe is up 3% for the quarter. You heard in my prepared remarks about the weather impact, but as soon as the weather cooled, we saw Europe accelerate to double-digit growth, especially as we exited the quarter. There was some shifting in July and August, but September remained strong. We've seen growth in the quarter across both channels. DTC was up 4%, wholesale was up 2%. Some key markets really performed. UK was up high mid-teen, and high single-digit growth in Germany and Italy. If you think across men and women, women continue to be strong in Europe, and the consumer is gravitating towards a broader assortment: looser fits, Levi's 501, Levi's Tops, which is our fastest growing category.

Speaker #2: Sure. Laurent, thanks for calling in. So, Europe was up 3% for the quarter. You heard in my prepared remarks about the weather impact, but as soon as the weather cooled, we saw Europe accelerate to double-digit growth, especially as we exited the quarter.

Speaker #2: There was some shifting in July and August, but September remained strong. We've seen growth in the quarter across both channels: DTC was up 4%, wholesale was up 2%.

Speaker #2: Some key markets really performed. The UK was up, you know, high mid-teens. There was high single-digit growth in Germany and Italy. If you think across men and women, women's continues to be strong in Europe.

Speaker #2: And the consumer is gravitating towards a broader assortment, looser fits, the 501. Tops, which is our fastest-growing category. So our view is, unlike the other major brands that you mentioned, we expect to end the year up mid-single digits, and this is accelerated substantially.

Harmit Singh: Our view is, unlike the other major brands that you mentioned, we expect to end the year up mid-single digit, and this is accelerated substantially relative to a year ago. September is off to a good start. Our pre-book for spring is up mid-single digit. Having said all that, our operating margins were also up 80 basis points. I think that's our perspective of Europe. A big shout out to the team on the ground that is working its way through it. On your question, I can broadly talk Q4 guidance, and then I'll talk gross margins in a minute. On Q4, we expect the momentum of our business to continue, and our view is that fundamentally the underlying trends remain strong. Our Q4 guidance overall is impacted by three things.

Speaker #2: Relative to a year ago, September is off to a good start. Our pre-book for spring is up mid-single digits. Having said all that, our operating margins were also up 80 basis points.

Speaker #2: So I think that's our perspective of Europe. A big shout-out to the team on the ground that is working its way through it.

Speaker #2: On your question, I can broadly talk to you for guidance, and then I'll talk about gross margins in a minute. But on Q4, we expect the momentum of our business to continue.

Speaker #2: And our view is that fundamentally the underlying trends remain strong. Our Q4 guidance overall is impacted by three things: the year we are lapping, which includes a 53rd week that helps Q4 last year by four points in revenue and 20 basis points in gross margin.

Harmit Singh: The year we're lapping, which includes a 53rd week, which helps Q4 last year by 4 points in revenue and 20 basis points in gross margin. We do have an incremental headwind on tariffs. It's impacting gross margin first, unmitigated by 130 basis points and mitigated by about 80 basis points and EPS by $0.03. Had it not been for tariffs, our gross margins in Q4 would have been up. It's pretty factual. We're just taking a conservative approach to the quarter given the complex macros. There are tariffs, maybe potential impacts on demand. We are not seeing it as we close out September and the continued transformation of our distribution center. The way to think about it is we're raising our fully top line guidance to 6% organic.

Speaker #2: We do have an incremental headwind on tariffs. It's impacting gross margin first, you know, unmitigated by 130 basis points, and mitigated by about 50 basis sorry, by about 80 basis points.

Speaker #2: And EPS by 3 cents. Had it not been for tariffs, our gross margins in Q4 would have been up. I mean, it's pretty factual.

Speaker #2: And then we're just taking a conservative approach to the quarter, given the complex macros. You know, there's tariffs and maybe potential impact on demand.

Speaker #2: We are not seeing it as we close out September and the continued transformation of our distribution center. The way to think about it, folks, is we're raising our full year top line guidance to 6% organic.

Harmit Singh: If you think of the last three years, 23% organic growth was flat, 24% was about close to 3%, and this year, 6%. As I said in the prepared remarks, we're solidly on track to be a mid-single-digit growth company. EBIT margins should end the year in the mid 11%, and in 2023, they're close to 9%. We've steadily improved that. Higher gross margin efforts on SG&A and flow through onto EBIT margin.

Speaker #2: And if you think of the last three years, organic growth was flat in 2023, close to 3% in 2024, and 6% this year. So, as I said in the prepared remarks, we're solidly on track to be a mid-single-digit growth company.

Speaker #2: And EBIT margins should end the year in the mid-11% range in 2023. They were close to 9%. So we've steadily improved that with higher gross margins and efforts on SG&A.

Speaker #2: And flow through onto EBIT margin.

Aida Orphan: That's great to hear. Best of luck with the holiday season.

Speaker #5: That's great. We wish you the best of luck with the holiday season.

Harmit Singh: Thanks.

Michelle Gass: Thank you.

Speaker #2: Thanks.

Speaker #3: Thank you.

Aida Orphan: Thank you. Our next question comes from the line of Matthew Boss of JPMorgan. Your line is open, Matthew.

Speaker #2: Thank you. Our next question comes from the line of Matthew Boss from JP Morgan. Your line is open, Matthew.

[Analyst]: Great, thanks. Michelle, could you elaborate on the momentum that you cited entering the season? Maybe what are you seeing in the denim category or from the consumer broadly? Harmit, have you seen any material change in demand trends in September or October globally, or is it just prudent planning for the remainder of the quarter that's driving the moderation that's embedded in your fourth quarter organic revenue guidance?

Speaker #6: Great, thanks. So, Michelle, could you elaborate on the momentum that you cited entering the season? Maybe what are you seeing in the denim category or from the consumer broadly?

Speaker #6: And then, Harmit, have you seen any material change in demand trends in September or October globally, or is it just prudent planning for the remainder of the quarter that's driving the moderation that's embedded in your fourth quarter organic revenue guidance?

Harmit Singh: I'll answer your second first because I'm sure it's top of mind for folks. No, the prudent guidance is just being, you know, conservatism on the macros. We're not seeing any underlying change in trends as I reflected. I think we're really well set for holidays, and Michelle can give you a perspective on the category and the consumer.

Speaker #2: I'll answer your second question first, because I'm sure it's top of mind for folks. No, it's just been prudent guidance, which has leaned on conservatism regarding the macros.

Speaker #2: We're not seeing any underlying change in trends, as I reflected. I think we're really well set for holiday. And Michelle can give you a perspective on the category and the consumer.

Michelle Gass: Sure. So Matt, thanks for the question. First, let me talk about the category. We're really excited. I mean, the denim category is accelerating both here in the U.S. and globally. As the definitive market leader, we are very well positioned to take advantage of that. Of course, as the leader, we help fuel the growth, and we're seeing that happen. Just to remind everyone, we are the market share leader across men's and women's globally, and we continue to maintain our number one share position in the U.S. as well for both men and women. I'd say most recently, we're really thrilled to see that we're gaining share in youth, premium, and with our Signature by Levi Strauss & Co. business.

Speaker #3: Sure. So, Matt, thanks for the question. First, let me talk about the category. We're really excited. I mean, the denim category is accelerating, both here in the U.S. and globally.

Speaker #3: And as the definitive market leader, we are very well positioned to take advantage of that. I mean, of course, as the leader, we help fuel the growth, and we're seeing that happen.

Speaker #3: You know, just to remind everyone, we are the market share leader across men's and women's globally. And we continue to maintain our number one share position in the U.S. as well for both men's and women's.

Speaker #3: I'd say most recently, we're really thrilled to see that we're gaining share in youth, premium, and with our signature business. So when we think about our business from a segmentation standpoint, we're doing really well with Red Tab, and for those consumers who are more value-oriented, we saw our signature business up double digits this quarter.

Michelle Gass: When we think about our business from a segmentation standpoint, doing really well with Red Tab, and for those consumers who are more value-oriented, we saw our Signature by Levi Strauss & Co. business up double digits this quarter. What's driving that? For our business in terms of market share gains, and again, as the leader, helping to fuel the momentum on the category overall, it starts with product. We're bringing a lot of newness and innovation into our business through fits, fabrics, silhouettes. A lot of that's still happening with loose and baggy, but we're really seeing strength across the board. Importantly, not only is it continuing to be the leader in denim bottoms, but we're really expanding our addressable market as we think about going from denim bottoms to head-to-toe denim lifestyle. We're seeing that momentum in categories like tops.

Speaker #3: What's driving that? You know, for our business in terms of market share gains and, again, as the leader helping to fuel the momentum in the category overall, I mean, it starts with product.

Speaker #3: We're bringing a lot of newness and innovation into our business through fits, fabrics, silhouettes. A lot of that is still happening with loops and baggy, but we're really seeing strength across the board.

Speaker #3: And importantly, not only is it continuing to be the leader in denim bottoms, but we're really expanding our addressable market as we think about going from denim bottoms to head-to-toe denim lifestyle.

Speaker #3: And you know, we're seeing that momentum in categories like tops. So, you know, when you take a step back, I mean, historically we've been around many decades. We really built this presence on denim, but we're building our future on denim lifestyle.

Michelle Gass: When you take a step back, historically, we've been around many decades. We really built this business on denim, but we're building our future on denim lifestyle. I feel good about the category, our position. Now, more broadly to your question on the consumer, I think kind of building on Harmit's comments and mine, our consumer continues to be resilient, and we're seeing that around the globe. It starts with the business, our fourth consecutive quarter of high single-digit organic growth globally. I think it's important to make note that for the quarter, this business was driven largely through unit growth, right? It's unit growth that's really fueling that momentum. We saw broad-based strength across geographies, across categories. That's both men's and women's, tops and bottoms, and both DTC and wholesale. Consumers are responding. Our strategies are working. I mentioned the denim category accelerating.

Speaker #3: So, I feel good about the category and our position. Now, more broadly, to your question on the consumer, I think, kind of building on Harmit's comments and mine, our consumer continues to be resilient.

Speaker #3: And we're seeing that around the globe. I mean, it starts with the business: our fourth consecutive quarter of high single-digit organic growth globally. I think it's important to note that, for the quarter, this business was driven largely through unit growth, right?

Speaker #3: So it's unit growth that's really fueling that momentum. We saw broad-based strength across geographies and across categories, both men's and women's, tops and bottoms.

Speaker #3: And both DTC and wholesale. So consumers responding, our strategies are working. You know, I mentioned the denim category accelerating. I mentioned really kind of being relevant across these various consumer cohorts.

Michelle Gass: I mentioned really kind of being relevant across these various consumer cohorts. We get that we're operating in a complex environment here in the U.S. We're staying close to it. When you think about the Levi's brand, in times of uncertainty, consumers turn to brands that they know and trust, and Levi's is certainly one of those brands. We're optimistic as we enter the fourth quarter. We expect the health and the momentum of our business to continue. We've been planning for holiday all year, and I would say we have our most robust lifestyle assortment we've ever brought to the consumer with lots of seasonally relevant products across really all categories. We continue to make progress on this head-to-toe.

Speaker #3: And you know, we get that we're operating in a complex environment here in the U.S. We're staying close to it, but you know, when you think about the Levi's brand, in times of uncertainty, consumers turn to brands that they know and trust, and Levi's is certainly one of those brands.

Speaker #3: So you know, we're optimistic as we enter the fourth quarter. We expect the health and the momentum of our business to continue.

Speaker #3: We've been planning for the holiday all year. And I would say we have our most robust lifestyle assortment we've ever brought to the consumer. We've launched a seasonally relevant product across really all categories.

Speaker #3: And again, we've continued to make progress on this head-to-toe. So you'll see lots of, you know, the fashion bottoms as well as tops and outerwear, third pieces, and I think products that really go sort of from day to night, at work to evening events, especially during that holiday season.

Michelle Gass: You'll see lots of the fashion bottoms as well as tops and outerwear, third pieces, and I think products that really go sort of from day to night at work to evening events, especially during that holiday season. There's a lot of newness, and that will also be fueled by tremendous marketing. We've had a great year of marketing with Beyoncé. We've got Shaboozey right now, and you can expect us to continue to connect in a relevant way during the holiday season.

Speaker #3: But there's a lot of newness, and that will also be fueled by tremendous marketing. You know, we've had a great year of marketing with Beyoncé.

Speaker #3: We've got Shaboozee right now, and you can expect us to continue to connect in a relevant way during the holiday season.

[Analyst]: That's great color. Best of luck.

Speaker #6: That's a great color. Best of luck.

Michelle Gass: Thanks, Matt.

Speaker #3: Thanks, Matt.

Aida Orphan: Thank you. Our next question comes from the line of Ike Boruchal of Wells Fargo. Please go ahead, Ike.

Speaker #2: Thank you. Our next question comes from the line of Ike Borakal of Wells Fargo. Please go ahead, Ike.

[Analyst]: Hi. Thanks for the guidance, Mike. Congratulations. Maybe Harmit, just to focus on margins specifically, can you comment on two things? One, within the SG&A cost line, you talked a little bit about it earlier, but the distribution line is running around 7% of sales right now. I know, can you remind us the moving pieces on the warehousing and DCs you have going on? A year ago, it was around 6%. I think historically, it's been 5%. How quickly does that margin start to benefit you guys as you go into next year? To that point, are you comfortable beginning to lay out a timeline on the return to 15% margin you guys kind of put back on the table several quarters ago as the momentum picked up? Thank you.

Speaker #7: Hi. Thanks for the ad. My congratulations. Maybe Harmit, just to focus on margin specifically, can you comment on two things? One, within the SG&A cost line, you talked a little bit about it earlier, but the distribution line is running around 7% of sales right now.

Speaker #7: I know. Can you remind us of the moving pieces on the warehousing and DCs you have going on? A year ago, it was around 6%.

Speaker #7: I think historically it's been 5. How quickly does that margin start to benefit you guys as you go into next year? And then to that point, are you comfortable beginning to lay out a timeline on the return to 15% margin you guys kind of put back on the table several quarters ago as the momentum picked up?

Harmit Singh: Sure. Let me start with gross margin. I'll give you some color about what happened in Q3 so people and yourself understand. I'll go quickly into SG&A and distribution. Think of gross margin in quarter three, up 110 basis points, higher than what we had expected when we talked about this a quarter ago. Three basic factors. One is the structural mix, which is higher women's DTC and international that we think continues for a long, long time. The second is we have taken moderate pricing, and we're driving higher full price sale. The third is the FX benefit, which we scored at about 50 basis points. This is more than offset, about 80 basis points of headwind from the tariffs. That's why we were ahead of last year, and the over-delivery was FX. It's difficult to predict. We haven't predicted FX for quarter four as an example.

Speaker #7: Thank you.

Speaker #2: Sure. So let me, I'll start with gross margin. I'll give you some color about what happened in Q3, so people and yourself understand. Then I'll go quickly into SG&A and distribution.

Speaker #2: So, think of gross margin in Q3, up 110 basis points, higher than what we had expected when we talked about this a quarter ago.

Speaker #2: Three basic factors: one is the structural mix, which is higher women's DTC and international that we think continues for a long, long time. The second is we have taken moderate pricing.

Speaker #2: And we're driving higher full-price sales. The third is the FX benefit, which we calculate at about 50 basis points. This more than offset the approximately 80 basis points of headwind from the tariffs.

Speaker #2: And so that's why you know we were ahead of last year. The overdelivery was effective, though difficult to predict. We haven't predicted effects for Q4, as an example.

Harmit Singh: Full price, it's something we're focused on. It's difficult to forecast that. Those are, that's gross margin. You think about SG&A. Our SG&A for the quarter was below 50%. You can think.

Speaker #2: And full price, you know, it's something we're focused on. It's difficult to forecast that. So those are, that’s Gross Margin. Then you think about SG&A.

Speaker #2: Our SG&A, you know, for the quarter, was below 5.

Speaker #1: The same. If you think the first half of the year is higher than 50% of revenue, higher than, you know, so the run rate was lower than the first half of the year, which was higher.

Operator: First half of the year is higher than 50% of revenue, higher than, you know, so the run rate was lower than the first half of the year, which was higher. The way we think of SG&A, I mean, there are two ways to look at it. A, gross profit dollars at a, you know, growing at a faster pace than SG&A dollars. So if you think of year to date, our gross profit dollars are up $220 million, and SG&A is up $126 million. So clearly, driving high flow through. If you look at it just as a revenue to SG&A, SG&A up 6% and revenue up 8%, so clear leverage. As we think we end the year, you know, if 6% is the revenue guidance organically, SG&A is probably in the mid-single digits, so there's clear leverage on that.

Speaker #1: The way we think of SG&A, I mean, there are two ways to look at it. A: gross profit dollars at, you know, growing at a faster pace than SG&A dollars.

Speaker #1: So if you think of, year to date, our gross profit dollars are up $220 million, and SG&A is up $126 million. So clearly driving higher flow-through.

Speaker #1: If you look at it just as a revenue to SG&A, SG&A is up 6%, and revenue is up 8%. So, there's clear leverage. As we think we end the year.

Speaker #1: You know, if 6% is the revenue guidance organically, SG&A is probably in the mid-single digits, so there's clear leverage on that. And this quarter, our SG&A being up relative to a year ago, there was performance comp, which was a big piece.

Operator: This quarter, our, you know, SG&A being up relative to a year ago, there was performance comp, which was a big piece. We're having a good year. Distribution cost, which I'll come to in a minute, so I'll answer your question. We open on a gross basis 14 new stores, and that's really, you know, the trifecta factor in DTC is driving the result. Marketing expenses moved a little between Q4 and Q3, especially as we launched the Shaboozey campaign and some foreign exchange headwind. To your question, Ike, about distribution, overall, as you know, we're remapping our distribution network to more of a hybrid network built for omnichannel from a manual network that was built for wholesale. There are clear benefits that we will see over time. In the short term, and transformations obviously have a short-term impact.

Speaker #1: We're having a good year. Distribution costs, which I'll come to in a minute, so I'll answer your question. You know, we opened on a gross basis 14 new stores.

Speaker #1: I mean, you know, and that's really, you know, the trifecta factor in DDC that's driving the result. Marketing expenses moved a little bit in Q4 and Q3, especially as we launched the Shibuji campaign and faced some foreign exchange headwinds.

Speaker #1: To your question, Ike, about distribution: overall, as you know, we are remapping our distribution network to more of a hybrid network built for omnichannel.

Speaker #1: From a manual network that was built for wholesale. So, there are clear benefits that we will see over time. In the short term, transformation obviously has a short-term impact.

Operator: Over the short term, in the U.S., we'll be running parallel DCs as we ramp up the new DC that's run by a third party. If you think of distribution costs, about 7%, and they've increased from a year ago, I would say about half of that is a reclass in distribution expenses from selling to distribution for e-commerce. The other half is equally split between volume, which is driving more distribution expenses, and the cost of parallel running. Our expectation is that parallel running of DCs, because the good news is our demand is pretty robust. As we make this transformation, we have to do it in a way that we not only fulfill the demand for our customers and the consumers, but also ramp up and close this DC. Our view is, and it's, you know, it's art and science. We're working through that.

Speaker #1: Over the short term, you know, we've in the US, we've been running parallel DCs as we, ramp up the new DC. that's run by a third party, so if you think of distribution costs about 7%, and they've increased from, from a year ago, I would say about half of that is a reclass in distribution expenses from selling to distribution for e-commerce.

Speaker #1: And the other half is equally split between volume, which is driving, you know, more distribution expenses, and the cost of parallel running. Our expectation is that parallel running of DCs, because the good news is demand is pretty robust.

Speaker #1: So, as we make this transformation, we have to do it in a way that we not only fulfill the demand for our customers and the consumers, but also ramp up and close this DC.

Speaker #1: So our view is, and is, you know, it's art and science. So we're working through that. But I think by the end of Q1 2026, is when we probably ramp down the parallel running of the DC.

Operator: I think by the end of Q1 2026 is when we probably ramp down the parallel running of the DC. Early 2026, when we report results for Q4 in early 2026, we'll give you a perspective on distributing expenses. Over time, long term, we should reduce cost per unit and the cost of running parallel DC. Does that help, Ike, answer your question?

Speaker #1: So, early Q2 2026, and when we report results for Q4 in early 2026, we'll give you a perspective. Undistributed and expensive. But over time, long-term, we should reduce cost per unit and the cost of running parallel distribution centers.

Speaker #1: Does that help, Ike? Answer your question?

Aida Orphan: I'm just curious about the timeline on the 15%, if there's anything you can share.

Speaker #2: Yes, and I'm just curious about the timeline on the 15%. If there's anything you can share.

Operator: Yeah. I think, you know, you're asking for a quick preview onto Investor Day or a preview on that. I think the way to think about that, Ike, is, you know, our EBIT margin should end the year about, in the mid-11s, right? You know, and they've grown nicely over the last couple of years. I think the basic building blocks are the following. The gross margin expansion continues. I mean, our view is that the structural piece continues, say, and you know, if you take probably a five-year period, you could say that's 200 basis points, you know, that should help EBIT. The SG&A leverage, if you're, you know, as we get to mid-single-digit growth company, I think the SG&A leverage is about 200 basis points. We may amp up advertising a little bit, you know, given the wonderful programs our Chief Marketing Officer and the teams are invoking.

Speaker #1: Yeah, I think, you know, you're asking for a quick preview on that, or a preview on the investment there. But I think the way to think about that, Ike, is, you know, our EBIT margin should end the year at about, in the mid-11th, right?

Speaker #1: And, you know, they've grown nicely over the last couple of years. I think the basic building blocks are the following: the gross margin expansion continues.

Speaker #1: I mean, our view is that the structural piece continues. Say, if you take probably a five-year period, you can say that's 200 basis points. You know, that should help EBIT.

Speaker #1: The SG&A leverage, if you're, you know, as we get to mid-single-digit growth company, I think the SG&A leverage is about 200 basis points.

Speaker #1: And we may amp up advertising a little bit, you know, given the wonderful programs our Chief Marketing Officer and the teams are invoking.

Operator: I think that helps drive the brand, makes the brand stronger, and importantly, drives revenue. I think that's probably a 50-odd basis points of headwind, and that will come with revenue. I think that's your building block. You think of gross margin expansion, SG&A leverage, and a little bit of reinvestment in advertising gets you to the 50%.

Speaker #1: I think that helps drive the brand, make the brand stronger. And importantly, drive revenue. I think that's probably a 50-odd basis points of headwind.

Speaker #1: And that will come with revenue. So I think that's your building block. So you think of gross margin expansion, SG&A leverage, and a little bit of reinvestment in advertising gets you to the 15%.

Aida Orphan: Got it. Thank you.

Speaker #2: Got it. Thank you.

[Company Representative]: Thank you. Our next question comes from the line of Paul Kearney. Barclays, please go ahead, Paul.

Speaker #3: Thank you. Our next question comes from the line of Paul Kearney at Barclays. Please go ahead, Paul.

Michelle Gass: Thanks for taking my question. Within the wholesale business growth, can you speak to how much was driven by maybe new points of distribution or expanded assortment versus like-for-like on stronger sell-throughs? How would you categorize inventory levels within the retail channel setting and tolerance? Thank you.

Speaker #4: Thanks for taking my question. Within the wholesale business growth, can you speak to how much was driven by maybe new points of distribution or expanded assortment versus like-for-like on stronger sell-throughs?

Speaker #4: And how would you categorize inventory levels within the retail channels heading into the holidays? Thank you.

Harmit Singh: Sure. Paul, thanks. Thanks for the question. As we said in our earlier remarks, we're quite pleased with the continued growth that we're seeing in the channel. This is now four consecutive quarters with this quarter at 5%. We do expect the year to be slightly positive in the wholesale channel for the entire year, which was actually up from our prior expectation, which we had said previously flat to slightly up. We saw positive growth in this channel across all segments. We saw particular strength in U.S. wholesale. We saw it in Asia, Latin America, and in the Signature by Levi Strauss & Co. business, which is more for that value consumer. The growth is largely being driven with existing accounts as their consumers are responding to our fashion fits. Women's, women's especially, is outperforming and lifestyle.

Speaker #5: Sure, Paul. Thanks, thanks for the question. So, you know, as we, as we said in our earlier remarks, we're quite pleased with the continued growth that we're seeing in the channel.

Speaker #5: This is now four consecutive quarters, with this quarter at 5%. We do expect the year to be slightly positive in the wholesale channel for the entire year, which was actually up from our prior expectation, which we had said previously would be flat to slightly up.

Speaker #5: We saw positive growth in this channel across all segments. We saw particular strength in U.S. wholesales. We saw growth in Asia, Latin America, and in the signature business, which is more for that value consumer.

Speaker #5: The growth is largely being driven by existing accounts, as, you know, their consumers are responding to our fashion fits. Women's, especially, is outperforming.

Speaker #5: And lifestyle. So, while we are bringing in some new accounts like Western wear, we've got new distribution in calendars, and we're expanding in Boot Barn.

Harmit Singh: Yes, we are bringing in some new accounts like Western Wear, we've got new distribution in Cavender's, we're expanding in Boot Barn. The growth is largely coming from our execution with our existing partners.

Speaker #5: The growth is largely coming from our execution with our existing partners.

Michelle Gass: Great. Thank you. Best of luck.

Speaker #4: Great. Thank you. Best of luck.

Harmit Singh: Thank you.

Speaker #5: Yeah. Thank you.

[Company Representative]: Thank you. Our next question comes from the line of Oliver Chen of TD Securities. Please go ahead, Oliver.

Speaker #3: Thank you. Our next question comes from the line of Oliver Chen of TD Securities. Please go ahead, Oliver.

[Analyst]: Thanks. Hi, Michelle. Hi, Harmit. Regarding Americas, the low single-digit growth, is your expectation that that continues in Q4? On the wholesale side, it's been a little more challenging channel, but do you think it'll remain sustainably positive, or will that be potentially volatile? There are a lot of great initiatives and partnerships, but part of the thesis is also like amplify to simplify with inventory management and SKU rationalization. How do we reconcile those two in terms of where you are in that journey?

Speaker #6: Thanks. Hi, Michelle. Hi, Harmit. Regarding America's low single-digit growth, is your expectation that that continues in Q4? On the wholesale side, it's been a little more challenging channel, but do you think it'll remain sustainably positive or will that be potentially volatile?

Speaker #6: Second, there are a lot of great initiatives and partnerships. Part of the thesis is also amplified to simplify with inventory management and SKU rationalization.

Speaker #6: So, how do we reconcile those two in terms of where you are in that journey?

Harmit Singh: Sure. Thanks, Oliver, for the question.

Speaker #5: Sure. Thanks, Oliver, for the question. As it relates to the Americas, or I can speak to the biggest part of the business, which is the U.S., we're really proud of how the team has been executing in that market.

[Analyst]: Thanks, Madison.

Harmit Singh: As it relates to the Americas, or I can speak to the biggest part of the business, which is the U.S., we're really proud about how the team has been executing in that market. This is our fifth consecutive quarter of growth, and I think, as you all know, it's our largest, most mature, most competitive market. Both channels, DTC was up 6%, wholesale up 2%, and we continue to see long-term growth opportunities in both those channels. I think about the DTC business here in the U.S. We have the potential to even double our store count and further accelerate e-commerce on the back of the momentum we have. On wholesale, which I was just talking about more broadly, global wholesale, wholesale in the U.S. remains strong.

Speaker #5: This is our fifth consecutive quarter of growth, and I think, as you all know, it's our largest, most mature, and most competitive market. Furthermore, both channels, DTC, were up 6%.

Speaker #5: Wholesale is up 2%. We continue to see long-term growth opportunities in both those channels. If I think about the DTC business here in the U.S., we have the potential to even double our store count and further accelerate e-commerce on the back of the momentum we have.

Speaker #5: And on wholesale, which I was just talking about more broadly, global wholesale, but wholesale in the U.S. remains strong. Our key partners are responding, and their consumers are responding to our expanded product pipeline across men's, especially women's, where we continue to be under-indexed in particular in the wholesale channel.

Harmit Singh: Our key partners are responding, and their consumers are responding to our expanded product pipeline across men's, especially women's, where we continue to be under-indexed, in particular in the wholesale channel. That head-to-toe lifestyle. As we look forward, I'll just say that as we look to Q4 in the U.S. and in the Americas, we expect the business to remain healthy against executing the same strategies we've been talking about, leaning into DTC, driving units per transaction, driving conversion, driving greater full-price sell-through. As I was mentioning earlier, a lot of our growth is coming off of units. While we are seeing that enhanced AUR, we're also driving a lot of volume growth. I will say, as it relates to U.S. wholesale, while we expect continued positive growth in DTC for the fourth quarter, we do expect in U.S.

Speaker #5: And then that head-to-toe lifestyle. You know, as we look forward, I'll just say that as we look to Q4, in the U.S. and in the Americas, we expect the business to remain healthy.

Speaker #5: Against executing the same strategies we've been talking about, leaning into DTC, you know, driving for transaction, driving conversion, driving greater full-price sell-through.

Speaker #5: As I was mentioning earlier, though, a lot of our growth is coming off of units. So while we are seeing that enhanced AUR, we're also driving a lot of volume growth.

Speaker #5: And, but I will say as it relates to U.S. wholesale, while we expect continued positive growth in DTC for the fourth quarter, we do expect U.S. wholesale to be down, given that we're lapping a very strong quarter last year, and we had that 53rd week.

Harmit Singh: wholesale to be down, given that we're lapping a very strong quarter last year, and we had that 53rd week. As we lap last quarter's fourth quarter, strong results, the 53rd week, and just frankly to be continuing to be prudent as we think about this channel, given the complex macro environment we're operating in in the U.S. Oliver, does that fully answer? You had part two of the question. Let me answer that, and then I'll come back and make sure I've fully answered. Part two, I'm glad you asked the question about SKU rationalization because we continue to make really good progress there. While we talk about expanded assortment, lifestyle, we are also, at the same time, reducing SKUs. We've decreased our SKUs by about 15% compared to last year. This has been an ongoing journey over the last 18 months or so.

Speaker #5: So, as we wrap last quarter's fourth quarter, we saw strong results, including the 53rd week. And frankly, we continue to be prudent as we think about this channel, given the complex macro environment we're operating in in the U.S.

Speaker #5: So, Oliver, to that, that fully answers. And then you had part two of the question. Let me answer that, and then I'll come back and make sure I've fully answered.

Speaker #5: But then part two, I'm glad you asked the question about SKU rationalization because we continue to make really good progress there. So while we talk about expanded assortment and lifestyle, we are also at the same time reducing SKUs.

Speaker #5: And we've decreased our SKUs by about 15% compared to last year. This has been an ongoing journey over the last 18 months or so.

Harmit Singh: We're continuing to raise the bar there. What's really enabling us to do that is through a tighter globally common or globally directed assortment. For perspective, if we think about the season we're in right now, the second half of 2025, 40% of our SKUs are globally common. That's up from a couple of years ago where it was under 10%. That allows us to make sure, again, that we can get the breadth and the lifestyle where we're getting significantly higher productivity per SKU. That metric, just for fun, is up 20% on SKU productivity. It really speaks to how the team is leaning in with a much stronger merchant mentality and operating like a retailer. You know that's helping us drive those tailwinds that we're seeing in the business overall and especially in DTC.

Speaker #5: So, we're continuing to raise the bar there. And what's really enabling us to do that is through a tighter, globally common, or globally directed assortment.

Speaker #5: So, just for perspective, if we think about the season we're in right now, the second half of 2025, 40% of our SKUs are globally common.

Speaker #5: That's up from a couple of years ago, where it was under 10%. So, that allows us to make sure, again, that we can get the breadth and the lifestyle, where we're getting significantly higher productivity per SKU.

Speaker #5: And, and that metric, just for fun, is, is up 20% on a, on a SKU productivity. So, it really speaks to how the team is leaning in with a much stronger merchant mentality, and operating like a retailer, and, you know, that's helping us drive those tailwinds that we're seeing in the business overall, and especially in DTC.

[Analyst]: Yeah. Thanks, Michelle. That's really helpful. This is quick, I think. Harmit, are there any gross margin comparisons we should be aware of as we anniversary them this year and think about next year?

Speaker #6: Yeah. Thanks, Michelle. That was really helpful. This is quick. I think, Harmit, are there any gross margin comparisons we should be aware of as we anniversary this year and think about next year?

Speaker #1: So, you know, last year was the 53rd week. This year, I think the only piece will be, you know, we’ll probably see tariff impact in the second half of this year.

Operator: Last year was 53rd week. This year, I think the only piece will be, you know, we probably see tariff impact in the second half of this year, next year in the first half. The way we think about gross margin, and I think you're asking for a high-level framework for 2026. It's a good question. Let me just talk about it because as we build up plans for next year, the tailwinds that we think probably help gross margin increase. One is we're looking at pricing opportunities, again, targeted, not only in the U.S. but globally, given that 60% of the business is global, is outside the U.S. The structural improvements of DTC International Women's continues. We continue to focus on full-price selling, and it's not anywhere close to 100%. There's clearly opportunity there.

Speaker #1: Next year, in the first half, the way we think about gross margin, and I think you're asking for a high-level framework for 2026, and it's a good question.

Speaker #1: Let me just talk about it because, as we build up plans for next year, the tailwinds that we think probably help gross margin accretion.

Speaker #1: One is we're looking at pricing opportunities, again, targeted, not only in the U.S., but globally. Given that 60% of the business is global, is outside the U.S.

Speaker #1: Structural improvements of DTC international women's continue. We continue to focus on full-price selling, and it's not anywhere close to 100%. So there's clearly opportunity there.

Operator: The other piece is as we think about product cost, you know, Michelle talked about the simplification of SKUs. We're looking at a shorter go-to-market calendar. Cotton commodity is at a better spot today than it was a year ago. We've broadly locked in product costing for the first half. We're in the process. By the time we report and guide Q2 2026, we'll probably have locked in the second half. Stay tuned. The headwind is largely tariffs. You've seen some impact in the second half of this year. We've offset the first, the quarter three, the working, you know, we're trying to do what we can for quarter four, but I'm telling you the appropriate numbers. Those are the tailwinds and the headwinds as you think about gross margin.

Speaker #1: The other piece is, as we think about product cost, you know, Michelle talked about the simplification of SKUs. We're looking at a shorter go-to-market calendar.

Speaker #1: And cotton, as a commodity, is at a better spot today than it was a year ago. We broadly locked in product costing for the first half here in the process.

Speaker #1: By the time we report and guide Q4, we'll probably have locked in the second half. So, stay tuned. The headwind is largely tariffs.

Speaker #1: And so you've seen some impact in the second half of this year. We've offset the first quarter of Q3. We're working, you know, to try and do what we can for Q4, but I guided you the appropriate numbers.

Speaker #1: And so those are the tailwinds and the headwinds as you think about gross margin.

[Analyst]: Thank you very much.

Speaker #6: Thank you very much.

[Company Representative]: Thank you. Our next question comes from the line of Dana Telsey of Telsey Advisory Group. Please go ahead, Dana.

Speaker #3: Thank you. Our next question comes from the line of Dana Tulsi of Tulsi Advisory Group. Please go ahead, Dana.

[Analyst]: Hi. Good afternoon, everyone. As you think about the lifestyle offering, Michelle, with tops and with bottoms and jackets, outfits, what did you see in the growth rates of the different categories? Given the marketing that you've been doing in the collaborations, how do you think of the AUR opportunities going forward? Thank you.

Speaker #7: Hi. Good afternoon, everyone. As you think about the lifestyle offering, Michelle, with tops, bottoms, and jackets outfits, what did you see in the growth rates of the different categories?

Speaker #7: And given the marketing that you've been doing in the collaborations, how do you think of the AUR opportunities going forward? Thank you.

Harmit Singh: Great. Thanks, Dana, for the question. We're really pleased with the progress and the acceleration in our tops business overall. I like to say, while we're pleased, we're not satisfied. There's a ton of upside because tops represents just currently 22% of our business. As we shared earlier, our tops grew 9% overall for the quarter, 10% year to date, and we're really seeing the strength across channels and genders. If you double-click underneath that, men's up 10%, and we're really seeing popularity in things like western tops, button-downs, polos, wovens. As we think about our tops strategy and denim lifestyle, we do start closer to our core, really injecting life into the western shirt, which is being advertised in our campaign right now with Shaboozey. Wovens, things like our authentic button-downs, that business for men is up 20%. Similarly, women's tops up 8%, seeing it across both channels.

Speaker #5: Great. Thanks, Dana, for the question. You know, we're really pleased with the progress and the acceleration in our tops business overall. And I'd like to say, while we're pleased, we're not satisfied.

Speaker #5: And there's a ton of upside because tops represent just currently 22% of our business. But, you know, as we shared earlier, our tops grew 9% overall for the quarter, 10% year-to-date, and we're really seeing the strength across channels and genders.

Speaker #5: So, you know, if you double-click underneath that, men's is up 10%, and we're really seeing popularity in things like Western tops, button-downs, polos, and wovens. As we think about our top strategy and denim lifestyle, we do start closer to our core.

Speaker #5: So, you know, we are really injecting life into the Western shirt, which is being advertised in our campaign right now with Shibuzi. But woven, so wovens, things like our authentic button downs, that business for men's is up 20%.

Speaker #5: Similarly, women's tops are up 8%. We're seeing this across both channels. Denim tops are up 12%, while wovens, including items like blouses, fashion shirts, and button downs, are up 37%.

Harmit Singh: Denim tops, I'll start there, up 12%. Wovens, including things like blouses, fashion, button-downs, up 37%. The category we're really expanding in to expand her closet, dresses and jumpsuits, up nearly 20%. Importantly, as we drive all this newness and excitement in head-to-toe dressing, we're seeing both growth in newness and in our core, which is really important to continue to support both. Back to the opportunity, if you think about our business today, again, while we're making progress, there's so much upside. Our ratio of bottoms to tops is three to one. That's up significantly from years ago where it was seven to one or five to one. Our goal is to get to one to one. I'm very confident we will. As we drive tops, it's a UPT driver. It can be a traffic driver.

Speaker #5: And then the category we're really expanding into is dresses and jumpsuits, up nearly 20%. I think importantly, as we drive all this newness and excitement and head-to-toe dressing, we're seeing both growth in newness and in our core, which is really important to continue to support both.

Speaker #5: Kind of back to the opportunity, though, if you think about our business today. Again, while we're making progress, there's so much upside. Our ratio of bottoms to tops is three to one.

Speaker #5: Now that's up significantly from years to go, where from years ago, where it was seven to one or five to one. But our goal is to get to one to one.

Speaker #5: And I'm very confident we will. And as we drive tops, it's a UPT driver. It can be a traffic driver. And it really kind of completes this mission we're on to have Levi's stand for a head-to-toe denim lifestyle.

Harmit Singh: It really kind of completes this mission we're on to have Levi Strauss & Co. stand for head-to-toe denim lifestyle. Hopefully, that addresses your question, Dana.

Speaker #5: So, hopefully that addresses your question, Dana.

[Analyst]: Yes, thank you.

Speaker #7: Yes. Thank you.

Harmit Singh: Great. Thanks.

Speaker #5: Great. Thanks.

[Company Representative]: Thank you. Our next question comes from the line of Aditya Karkhani of UBS. Your line is open, Aditya.

Speaker #3: Thank you. Our next question comes from the line of Aditya Kokani of UBS. Your line is open, Aditya.

[Analyst]: Hi. I think this is Chase Hall, and hopefully, you can hear me. My question is that it sounds like you took some pricing in Q3. Harmit, I think you said one of the gross margin drivers in Q3 was pricing. Was that in response to tariff? In Q4, sorry, before that, the consumer, it sounds like, responded well to those price increases. Did you see any resistance? In Q4, do you plan on accelerating the price increases? Therefore, do you expect the consumer to react differently if you increase prices in the fourth quarter? Thank you.

Speaker #8: Hi, I think this is Chase Tall. Hopefully, you can hear me. My question is that it sounds like you took some pricing in Q3.

Speaker #8: Harmit, I think you said one of the gross margin drivers in Q3 was pricing. Was that in response to tariffs? And in Q4, sorry, before that, the consumer—it sounds like they responded well to those price increases.

Speaker #8: Did you see any resistance in that Q4? Do you plan on accelerating the price increases, and therefore, do you expect the consumer to react differently if you increase prices in the fourth quarter?

Speaker #8: Thank you.

Operator: Jay, we did. We took a little bit of pricing in Q3. It was not on MSRP because the goods have already been ticketed. This was in the selling to our customers in the U.S. I'm talking about. We do it thoughtfully. We have really great momentum, as you mentioned, driven by demand. To answer your question, no impact on demand. We're not seeing any impact on demand either from the customer or the consumer. The other piece that's really working for us is our new products. As we think longer-term, pricing through innovation is one lever. We are also taking a hard look at our promotion and minimizing this as we focus on higher full-price selling, which will also probably continue into 2026. The way we're thinking about pricing, it's more important to think about what's the price-value equation for our products relative to the marketplace.

Speaker #1: So, Jay, we did. We took, you know, a little bit of pricing in Q3. It was not an MSRP because, you know, the goods are already being ticketed.

Speaker #1: This was in the sell-in to our customers in the U.S., I'm talking about. And, you know, we do it thoughtfully. We have really great momentum, as you mentioned, driven by demand.

Speaker #1: But to answer your question, there has been no impact on demand. We're not seeing any impact on demand either from the customer or the consumer. The other piece that's really working for us is our new products.

Speaker #1: Because, and so, as we think longer-term pricing through innovation, this is one lever. We are also taking a hard look at our promotions.

Speaker #1: You know, and minimizing this as we focus on higher full-price selling. We'll also, you know, be something that probably continues into into 26. The way, the way thinking, about pricing, it's more important to think about what's the price value equation for our products relative you know, to the marketplace.

Operator: That's an important consideration set. The other piece that's important, Jay, is the segmentation of a product. If you think of the value consumer in the U.S., we offer a Signature by Levi Strauss & Co. product. It's a great price point. It's offered through Walmart. It had a great cost. It was up double digits. We've just also introduced Blue Tab, which is a premium product. It's a premium position. It's one and a half times to two times the price of Red Tab product and offers rare value even when you benchmark that. It's a limited offer. We hope to scale it. It's doing really well. That's how one is thinking through it. There's a little bit of pricing in other parts of the world, but it's not something that we've done globally.

Speaker #1: And that's an important consideration set. The other piece that's important, Jay, is the segmentation of our products. So if you think of the value consumer in the U.S., we offer signature products.

Speaker #1: It's a great price point. It's offered through Walmart, and it had a great quarter. It was up double digits. We've just also introduced BlueTag, which is a premium product.

Speaker #1: It's a premium position. It's one and a half to two times the price of a RedTag product and offers real value, even when you benchmark that.

Speaker #1: It's a limited offer. We hope to scale it. It's doing really well. So that's how one is thinking through it. And there's a little bit of pricing in other parts of the world.

Speaker #1: But it's not, you know, something that we've done globally. So when we talk about Q2 and guide Q3, we'll give you a perspective on the pricing actions we have taken, or our teams have taken, around the world.

Operator: When we talk about 2026 and guide 2026, we'll give you a perspective on the pricing actions we have taken or our teams have taken around the world.

[Analyst]: Got it. Harmit, thank you so much.

Speaker #8: Got it. Harmit, thank you so much.

Operator: Thanks, Jay.

Speaker #1: Thanks, Jay.

[Company Representative]: Thank you. Our next question comes from the line of Paul Lejuez of Citi. Please go ahead, Paul.

Speaker #3: Thank you. Our next question comes from the line of Paula Hughes of City. Please go ahead, Paula.

[Analyst]: Thank you. This is Tracy Cogan filling in for Paul. I just had a follow-up on the last question. I think you said, from what I understood, that you only raised prices on sell-ins to your partners. Have you actually had time to see the consumer response to these higher prices, or were you only saying that your partners haven't had any hesitancy to buy at these higher prices? I was hoping you could comment on the U.S. wholesale business, how sell-ins are comparing to sell-outs. Thank you.

Speaker #9: Thank you. This is Tracy Kogan filling in for Paul. I just had a follow-up on the last question. I think you said, from what I understood, that you only raise prices on sell-ins to your partners.

Speaker #9: So, have you actually had time to see the consumer response to these higher prices? Or were you only saying that your partners haven't had any hesitancy to buy at these higher prices?

Speaker #9: And then, just more broadly, I was hoping you could comment on the U.S. wholesale business—how sell-ins are comparing to sell-outs. Thank you.

Operator: Generally, Tracy, good question. I think it's a combination of both, you know, because the pricing initiatives have been now there through the quarter. The customers are not, we're not seeing any demand contraction, given the marginal pricing that has been taken or a consumer reaction. The consumer is generally resilient, you know, so far. That's how we're approaching the pricing. Plus, the full-price selling has been there for a while. Given that the product is very relevant and hitting the mark, we're not seeing any consumer pullback. I think that was your first question. What was your second one, Tracy, again?

Speaker #1: Yeah. Generally, Tracy, good question. I think it's a combination of both. You know, because the pricing initiatives have been now there through the quarter.

Speaker #1: You know, A, the customers are not, we're not seeing any demand contraction, you know, given the marginal pricing that has been taken or consumer reaction.

Speaker #1: The consumer is genuinely resilient, you know, so far. And that's how we're approaching the pricing. Plus, the full-price selling has been there for a while.

Speaker #1: And given that the consumer, that the product is very relevant and hitting the mark, you know, we're not seeing any consumer pullback. I think that was your first question.

Speaker #1: What was your second one, Tracy, again?

[Analyst]: I was hoping you could just comment more broadly on how the sell-ins to your wholesale partners are comparing to the sell-outs. Are they being more cautious than maybe the end consumer might indicate or something like that?

Speaker #9: I was hoping you could just comment more broadly on how the sell-ins to your wholesale partners are comparing to the sell-outs. Are they being more cautious than maybe the end consumer might indicate?

Speaker #9: Or, or something like that?

Operator: The sell-throughs have been fairly consistent with the sell-ins. That's why we are optimistic about ending the year strongly and then maintaining the momentum as we begin 2026.

Speaker #1: Well, the, the set truths have been fairly consistent with the sell-in. and, and that's why, you know, we are, you know, optimistic about, ending the year in a, strongly and then, maintaining the momentum as we begin 26.

[Analyst]: Gotcha. Thanks very much.

Speaker #9: Gotcha. Thanks very much.

Operator: Thank you, Tracy.

Speaker #1: Thank you, Tracy.

[Company Representative]: Thank you. At this time, I'd like to turn the floor back over to Michelle Gass for any closing remarks. Madam?

Speaker #3: Thank you. At this time, I'd like to turn the floor back over to Michelle Gass for any closing remarks. Madam?

Harmit Singh: Yes. Thank you, everyone, for joining the call. We will look forward to talking to you at the end of Q4.

Speaker #5: Yes, thank you, everyone, for joining the call. We look forward to talking to you at the end of Q4.

[Company Representative]: Thank you. This concludes today's conference call. Please disconnect your lines at this time.