Levi Strauss & (US:LEVI)2025-10-09 22:00Financial Data and Key Metrics Changes - In Q3, the company achieved a net revenue growth of 7%, with international markets contributing approximately 75% of this growth and the U.S. contributing 25% [17] - Gross margin reached a record 61.7%, expanding 110 basis points year-over-year, despite an 80 basis point headwind from tariffs [18][19] - Adjusted EBIT margin was 11.8%, with adjusted diluted EPS at $0.34, both exceeding expectations [21] Business Line Data and Key Metrics Changes - Direct-to-consumer (DTC) sales increased by 9%, driven by strong performance in both stores and online, with e-commerce growing 16% [12][13] - Women's business grew 12% year-to-date, while men's business grew 5% [9] - The bottoms business saw a 6% increase, and tops grew 9% overall, with notable strength in women's tops [10][70] Market Data and Key Metrics Changes - The U.S. market grew 3%, while international business was up 9%, led by double-digit growth in Asia [5][14] - In Europe, net revenues increased by 3%, with strong performance in the UK [22] - Asia's net revenues accelerated to a 12% increase, driven by double-digit growth in key markets like India, Japan, and Korea [22] Company Strategy and Development Direction - The company is pivoting to a DTC-first strategy, focusing on becoming a head-to-toe denim lifestyle retailer [4][6] - Continued investment in impactful marketing campaigns and strategic partnerships is expected to drive brand momentum [5][6] - The company aims to expand its addressable market by defining and owning the denim lifestyle category [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum, citing a strong product pipeline and robust consumer demand [5][16] - Despite a complex macro environment, the company anticipates a strong finish to 2025 and continued growth into 2026 [16][28] - The company is taking a prudent approach to its Q4 outlook, expecting organic net revenue growth of approximately 1% [26] Other Important Information - The company returned $151 million to shareholders in Q3, a 118% increase year-over-year, and declared a dividend of $0.14 per share, up 8% [23][24] - Inventory levels were up 12% in dollar terms, driven by investments ahead of the holiday season [24] Q&A Session Summary Question: European momentum and Q4 guidance - Management noted that Europe grew 3% in Q3, with strong performance in key markets and positive pre-booking for spring [31][32] - Q4 guidance reflects a conservative approach due to the complex macro environment, with expected gross margin impacts from tariffs and the absence of a 53rd week [34] Question: Momentum entering the season and demand trends - Management confirmed no material change in demand trends, emphasizing strong positioning in the denim category [39][40] Question: Wholesale business growth drivers - Growth in the wholesale channel was driven by existing accounts responding positively to fashion fits, with new distribution points contributing as well [55] Question: Inventory management and SKU rationalization - The company has reduced SKUs by about 15% compared to last year while expanding its lifestyle assortment [63][64]