Levi Strauss & Co. (LEVI) saw its shares decline in after-hours trading Wednesday, even as the denim icon delivered stronger-than-expected second-quarter results and lifted its full-year outlook. The stock closed the regular session down 1.2% at $24.37 before sliding approximately 5% further in extended trading, according to data from Reuters.
The pullback came despite a quarter that saw net revenue climb 8% year-over-year to $1.56 billion, surpassing the consensus estimate of $1.52 billion. Adjusted earnings per share landed at $0.28, also ahead of the $0.24 analysts had projected. Prior to the report, Levi shares had rallied 17.5% year-to-date, making the post-earnings sell-off particularly notable.
Guidance Raise Fails to Impress
Levi management raised its fiscal 2026 net revenue growth forecast to a range of 7.0% to 7.5%, up from the prior 5.5% to 6.5% range. Adjusted diluted EPS guidance was also increased to $1.46–$1.52 from $1.42–$1.48. However, as noted by The Wall Street Journal, the midpoint of the new EPS guidance came in slightly below the $1.51 FactSet consensus, suggesting expectations had already been elevated.
CEO Michelle Gass characterized the quarter as “another proof point” for the company’s strategy, describing Levi as a “DTC-first, denim lifestyle company.” CFO and Growth Officer Harmit Singh highlighted that growth was broad-based across “markets, channels and categories.”
Tariff and Consumer Headwinds
Investors appeared to focus on the quality of the guidance raise, as well as ongoing tariff risks and the uneven state of the U.S. apparel market. The company’s outlook assumes that U.S. tariffs remain at 30% on Chinese imports and 20% on goods from other countries. It also presumes no major disruptions from consumer spending weakness, inflation, supply chain issues, additional tariff actions, or currency fluctuations.
Consumer Edge analyst Michael Gunther told Reuters that Levi’s pricing and basket trends have largely tracked the broader industry this year, which he called “notable” given the company’s push into more premium products.
Regional and Channel Performance
Revenue growth was solid across geographies: the Americas posted a 9% increase, Asia rose 10%, and Europe gained 4%. Beyond Yoga, the activewear brand Levi acquired in 2021, surged 16%. Direct-to-consumer revenue grew 11%, while wholesale advanced 5%, reflecting the company’s strategic pivot toward its own stores and website.
Levi also announced a 14% increase in its quarterly dividend to $0.16 per share, payable August 5 to shareholders of record on July 22. The company said its $200 million accelerated share buyback program, which began in the first quarter, is expected to conclude in the third quarter.
Peer Pressure
The broader apparel sector faced headwinds Wednesday. Gap Inc. fell 3.8%, American Eagle Outfitters dropped 1.2%, and Ralph Lauren shed 3.7%. The consumer discretionary sector ETF (XLY) declined 1.8%. Reuters reported that Gap and American Eagle had experienced softness in certain women’s apparel categories as recently as May.
While Levi’s strong quarter demonstrates the resilience of its denim-focused strategy and direct-to-consumer push, the market’s cautious reaction underscores lingering concerns about tariff exposure and the sustainability of consumer demand in the second half of the year.
