Levi Strauss Reports Q2 Net Income of $87.3 Million; DTC Business Share Exceeds 50% for the First Time

On July 8, apparel manufacturer Levi Strauss & Co. released its financial report for the second quarter of fiscal year 2026, ended May 31. During the period, the company achieved revenue of $1.56 billion, an increase of approximately 8% from $1.45 billion in the same period last year; net income was $87.3 million, compared to $67 million in the same period last year.

Based on the second-quarter financial performance, Levi Strauss adjusted its full-year guidance: the expected full-year sales growth was raised from 5.5%-6.5% to 7%-7.5%; the expected range for adjusted earnings per share was increased to $1.46 to $1.52.

The expansion of direct-to-consumer (DTC) business was the core variable influencing the revenue structure this quarter.

In the second quarter, Levi Strauss's DTC channel net revenue increased by 11% year-over-year, accounting for 51% of total revenue, surpassing traditional wholesale business for the first time. Among these, e-commerce net revenue grew by 19% year-over-year. Traditional wholesale channel net revenue increased by 5%.

Regarding growth drivers, approximately 50% of the revenue increase in the second quarter came from product price hikes, while the other 50% stemmed from growth in actual unit sales volume.

From a regional perspective, international markets provided the main incremental growth. The Asian market achieved a 12% organic revenue growth in the second quarter, leading all regions.

In terms of the supply chain closely linked to the Chinese market, company management disclosed that current financial expectations have incorporated the assumption that the United States will maintain a 30% tariff on imports from China. To hedge against this pressure, Levi Strauss is adjusting its sourcing bases, shifting part of its production capacity away from China and other locations to diversify tariff risks.

Regarding profit margins, the company's gross margin rose slightly by 10 basis points to 62.7% this quarter. Lower product line costs and the implementation of pricing strategies contributed to gross margin expansion, but this was partially offset by exchange rate fluctuations and the aforementioned tariff costs.

However, from a business structure perspective, the Levi's brand remains the company's core source of revenue.

In recent years, the company has attempted to expand into non-denim categories such as women's wear and tops, and broadened its business scope through the acquisition of yoga apparel brand Beyond Yoga. However, at present, the scale of these related businesses remains relatively limited and has not yet changed the pattern of the company's primary reliance on denim apparel business.

A key focus for the market currently is whether Levi Strauss can maintain its growth momentum.

Amid a slow recovery in overall demand in the apparel industry, brands need to continuously attract young consumers and improve sales performance through new product development and channel optimization. Meanwhile, although the increasing share of direct channels helps improve the profitability structure, it also implies higher operational investments, requiring the company to balance scale growth with cost control.

Furthermore, the company has gradually adjusted its business portfolio in recent years, reducing investment in certain non-core businesses and concentrating more resources on the Levi's brand. This strategy helps improve operational efficiency, but it also means that future growth will rely more heavily on the market performance of the core brand itself.

Overall, Levi Strauss's second-quarter financial report shows that both revenue and profits achieved growth, with direct channels continuing to provide support and improved performance in some regional markets. However, given the ongoing uncertainties in the apparel consumption environment, the company's future growth will depend on the competitiveness of its core brand, changes in consumer demand, and the effectiveness of channel adjustments.