Levi Strauss & Co. grew direct-to-consumer revenue just 2 percent in the third quarter, down sharply from 8 percent organic growth in Q2, after a back-to-school campaign in the U.S. failed to drive expected traffic. Wholesale picked up the slack, rising 6 percent for the quarter ended Aug. 30.

DTC accounted for 45 percent of total business in the period. Within the channel, e-commerce sales rose 10 percent, but comparable sales were flat. Chief executive officer Michelle Gass attributed the shortfall to weak store traffic on both sides of the Atlantic: heat waves kept shoppers out of European stores, while U.S. messaging missed the mark.

"In the U.S., I'd say our back-to-school campaign did not meet our expectations and it didn't drive the level of traffic and demand we anticipated," Gass said. "The environment has gotten a lot more competitive. We've got a lot of people talking about denim these days, but we take accountability."

What went wrong with the messaging?

Gass said Levi's leaned on its loose fits in marketing at a moment when consumer energy had shifted toward low-rise silhouettes for women. "We just did not have as many big brand driving moments," she said. "The message was not as relevant as it needed to be. So we acted very quickly."

The company pivoted late in the quarter toward low-rise core fits — low loose, super low and low straight — in stores and in media plans, and increased advertising spend. Gass said tariff refund money funded the additional media investment. The recalibration comes as Levi's rethinks its celebrity strategy after wrapping a yearlong partnership with Beyoncé Knowles-Carter in 2025. Gass said the slowdown prompted a full review of marketing plans for the rest of this year and next, adding: "This was just a bit of a speed bump, but I'm confident that we're going to emerge even stronger as we look at 2027."

How did the P&L hold up?

Despite the DTC stumble, the quarter delivered broad profit gains:

• Net income from continuing operations rose 38.5 percent to $169 million, excluding the Dockers business sold to Authentic Brands Group in February.
• Adjusted EPS reached 48 cents, up from 34 cents a year earlier and 12 cents above the 36 cents analysts forecast, per Yahoo Finance.
• Gross margin expanded 450 basis points to 66.2 percent, with 490 basis points coming from tariff refunds.
• Total revenues increased 4 percent to $1.6 billion, or 5 percent organically.

Outgoing chief financial and growth officer Harmit Singh said the company chose to redeploy the windfall rather than bank it. "We made the decision to redeploy a majority of our tariff refund benefit back into the business during [the third and fourth quarters] to support future growth," Singh said. "Reflecting confidence in our outlook, we are raising our full-year profit guidance and plan to initiate a $100 million accelerated share repurchase program."

Levi's now expects organic revenue growth of about 6 percent this year, toward the top of its prior 5.5 percent to 6 percent range, and lifted its adjusted EPS outlook to $1.54–$1.56 from $1.46–$1.52.

What happens in Q4?

Gass framed the timing of the marketing pivot as an advantage heading into the holiday quarter, the company's most important. DTC has already rebounded in Europe, she said, and the shift in U.S. messaging supports a forecast of midsingle-digit growth for the current quarter.

Inventory discipline is also in play: stock on hand fell 3 percent at the end of the quarter. Investors reacted cautiously, sending shares down 2.2 percent to $19.09 in after-hours trading on Wednesday. With wholesale now carrying growth while DTC recovers, Levi's enters the holiday season betting that redirected tariff-refund dollars and a refit product message can restore momentum across both channels.