Levi Strauss & (US:LEVI)2025-07-10 22:02Financial Data and Key Metrics Changes - The company reported a 9% increase in organic net revenue for Q2, marking the third consecutive quarter of high single-digit growth [7][33] - Gross margin reached a record 62.6%, expanding 140 basis points year-over-year, driven by lower product costs and a favorable channel mix [36][38] - Adjusted diluted EPS increased by 37% year-over-year to $0.22 [38] Business Line Data and Key Metrics Changes - Direct-to-consumer (DTC) sales grew by 10%, with 13 consecutive quarters of positive comparable sales growth [7][22] - The wholesale business also saw growth, up 7%, with notable performance in Europe [7][33] - Women's business grew by 13%, while men's business increased by 6% [33] Market Data and Key Metrics Changes - The Americas net revenues were up 9%, with operating margins increasing to 20.5% [39] - Europe experienced a 15% increase in net revenues, with a 17.2% operating margin [40] - Asia's net revenues were flat due to strategic actions taken to improve structural economics, but DTC grew double digits in several markets [41] Company Strategy and Development Direction - The company is transitioning to a DTC-first model, with over half of its business now coming from owned and operated channels [9][11] - A focus on becoming a full head-to-toe apparel lifestyle brand is evident, with significant growth in lifestyle categories [9][10] - The company is narrowing its focus by divesting from non-core brands like Dockers, allowing for a more concentrated effort on the Levi's brand [10][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a challenging global operating environment, citing strong brand equity and consumer connection [11][30] - The company raised its full-year guidance for organic net revenue growth to 4.5% to 5.5% [45] - Despite uncertainties around tariffs, the company believes it is well-positioned to manage potential impacts [44][50] Other Important Information - The company opened 16 net new stores in Q2, expanding its global store network [24] - The loyalty program has nearly 40 million members, contributing to increased consumer engagement and higher average unit retail (AUR) [25] - The company expects to return at least $100 million from the net proceeds of the Dockers sale to shareholders through share repurchases [42] Q&A Session Summary Question: Drivers of demand strength and market share gains - Management noted broad-based growth across all business segments and maintained a top market share position globally and in the U.S. [53][56] Question: Clarification on organic wholesale revenues - Management indicated a prudent approach to wholesale, expecting it to remain flat to slightly positive for the year, with growth driven by digital channels and premium customers [66][70] Question: Marketing initiatives and price increases - The company is investing in brand marketing and has exciting campaigns planned for the fall, with room for further AUR growth across categories [75][80] Question: Margin profile of DTC business - DTC margins have improved significantly, with a focus on revenue per square foot and cost management contributing to this positive trend [95][99] Question: Tariff assumptions and pricing strategy - The company has factored in additional tariffs into its guidance and is implementing strategies to mitigate their impact [103][44]