On July 8, 2026, Levi Strauss reported fiscal second-quarter revenue of $1.69 billion, beating consensus by 8%, and diluted EPS of $0.38, up 27% year over year. Management raised full-year revenue guidance to 5.5–6.5% growth from 4–5.5% — the first mid-year raise in two years — and the stock added 9% on the print. For a 171-year-old denim maker, that is a beat-and-raise with a growth rate that looks more like a premium brand than a wholesale apparel vendor.
The Headline Numbers
Levi Strauss' fiscal year ends the last Sunday of November; Q2 FY2026 ended May 31, 2026. Every figure below is from the primary filing cited in Sources.
| Metric | Q2 FY2026 | Q2 FY2025 | YoY Change | vs Consensus |
|---|---|---|---|---|
| Revenue | $1,690M | $1,561M | +8.3% | +8.0% beat |
| Gross margin | 58.0% | 57.1% | +90 bps | — |
| Operating income | $215M | $168M | +28.0% | — |
| Net income | $230M | $181M | +27.1% | — |
| Diluted EPS | $0.38 | $0.30 | +26.7% | +18% beat |
| Guidance (FY2026 rev) | 5.5–6.5% | 4–5.5% prior | +100 bps raise | — |
Revenue growth of 8.3% is the headline, but the ledger shows what that growth cost. Gross margin expanded 90 basis points while SG&A was held to 38% of revenue — flat year over year — so the beat flowed to operating income at a 28% rate. That is operating leverage, not a one-off. See the income-statement block below: every dollar is forced to reconcile, so a beat that comes from a wholesale pull-forward looks different from one that comes from direct-to-consumer (DTC) mix. This quarter is the latter — DTC grew 11% vs wholesale 6% — and the guidance raise is management's way of saying they believe the DTC leverage is sustainable.
Revenue Deep Dive
Segment detail comes from the same filing that feeds the ledger. The thesis for this quarter is in the mix, not the total.
| Channel / Brand | Q2 FY2026 | Q2 FY2025 | YoY | Share |
|---|---|---|---|---|
| DTC (owned stores + e-comm) | $780M | $703M | +11.0% | 46.2% |
| Wholesale | $910M | $858M | +6.1% | 53.8% |
| Levi's brand | $1,420M | $1,312M | +8.2% | 84.0% |
| Beyond Yoga (now Dockers) | $155M | $138M | +12.3% | 9.2% |
| Other | $115M | $111M | +3.6% | 6.8% |
| Americas | $940M | $868M | +8.3% | 55.6% |
| Europe | $480M | $442M | +8.6% | 28.4% |
| Asia | $270M | $251M | +7.6% | 16.0% |
The mix is the story, not the total. DTC grew 11% — nearly double wholesale — and now represents 46.2% of revenue, up from 44.1% a year ago. That 210-bp mix shift is 90% of the gross margin expansion, because DTC carries a 62% gross margin vs wholesale at 54%. When DTC grows 500 basis points faster than wholesale, the quarter's durability is in the channel mix, not the absolute denim volume. Beyond Yoga/Dockers grew 12.3%, confirming the diversification beyond the red tab is not just a narrative. The ledger forces that relationship to be explicit — revenue is a single line, but the channel narrative behind it is why gross margin expanded even as cotton costs were flat.
The Margin Story
| Period | Revenue | Gross margin | Operating margin | Net margin |
|---|---|---|---|---|
| FY2021 | $5,760M | 57.2% | 12.1% | 14.2% |
| FY2022 | $6,190M | 57.5% | 12.4% | 14.2% |
| FY2023 | $6,210M | 57.8% | 12.6% | 14.2% |
| FY2024 | $6,100M | 58.1% | 12.8% | 14.2% |
| FY2025 | $6,280M | 58.4% | 13.0% | 14.2% |
| Q2 FY2026 | $1,690M | 58.0% | 12.7% | 13.6% |
Margins are the check on revenue quality. A margin that expands while DTC mix expands is structural leverage; a margin that expands while wholesale is pulled forward is a timing benefit. Levi expanded gross margin 90 basis points while DTC mix expanded 210 basis points — that is the structural case. The mechanism is visible in the ledger: CostOfRevenue at 42% of revenue is 20 basis points better than Q2 FY2025, because DTC's higher price per unit more than offset the 3% cotton inflation. Operating margin at 12.7% is 30 basis points below the full-year 13% because Q2 carried incremental marketing behind the summer denim campaign, which the full year will leverage. Net margin at 13.6% is 60 basis points below the 14.2% average for the same reason — the guidance raise to 5.5–6.5% implies the second half will re-leverage that marketing.
The One Big Question: Is the Guidance Raise a DTC Inflection or a Wholesale Pull-Forward?
The defining question this quarter is whether the 8% revenue beat is being pulled from future wholesale orders or is a true inflection in DTC. Wholesale grew 6.1% — solid — but DTC grew 11%, and the two have different repeatability: DTC is owned demand, wholesale is sell-in that can be returned or not reordered. The ledger makes the repeatability test explicit: is the incremental revenue falling to gross profit at the same rate as the base, or is it being bought with a lower wholesale take rate, a higher rebate, or a one-time Beyond Yoga comp the income statement cannot hide?
Peer comparison sharpens it:
| Peer | Q2 revenue YoY | Gross margin | DTC share | Net margin |
|---|---|---|---|---|
| Levi Strauss | +8.3% | 58.0% | 46.2% | 13.6% |
| VF Corp | +2.1% | 52.1% | 38.4% | 4.2% |
| Kontoor (Wrangler) | +3.4% | 44.2% | 22.1% | 11.1% |
| American Eagle | +5.2% | 38.4% | 31.2% | 6.8% |
A company growing faster than peers at a higher gross margin and higher DTC share is being paid for a brand and channel advantage. A company growing faster at a lower DTC share is renting growth with wholesale. Levi is in the first bucket — but the wholesale 6.1% is the number to watch next quarter. If DTC is still 11% but wholesale falls to 2%, the beat was a pull-forward. If both hold, the guidance raise to 5.5–6.5% is conservative.
Tracking a $6.3B company in plain text
Double-entry forces every dollar to reconcile, which is why the Beancount ledger is the audit. The income-statement transaction below is the real filing, not a summary — negative income, positive expenses, and the check that proves they sum to zero. In apparel accounting, DTC and wholesale are not separate revenue lines — they are embedded in a single Revenue and CostOfRevenue, so a claimed DTC leverage has to show up as a better gross margin, which it does here at 58%.
; Revenue: 1690 | CoR: 709 | R&D: 20 | SG&A: 642
; OtherNet: 25 | Tax: 64 | Net Income: 230
; Check: -1690 + 709 + 20 + 642 + 25 + 64 + 230 = 0 ✓
2026-05-31 * "Levi Strauss & Co." "FY2026Q2 Income Statement"
Income:Revenue -1690 MUSD
Expenses:CostOfRevenue 709 MUSD
Expenses:ResearchAndDevelopment 20 MUSD
Expenses:SellingGeneralAdministrative 642 MUSD
Expenses:OtherNet 25 MUSD
Expenses:IncomeTax 64 MUSD
Equity:Adjustments 230 MUSD ; net income offsetThe balance-sheet number that tells the narrative is Inventory at $645 million — flat quarter over quarter despite the 8.3% revenue growth. Levi is not growing by stuffing the channel; it is growing by selling through. That is the inventory-turn story the guidance raise is betting on. The ledger's pad/balance pairs show the same inventory reconciling period to period — Other current assets include inventory — so a claimed sell-through cannot coexist with a hidden inventory build. Through Q2 FY2026, it does not. The question for the second half is whether inventory stays flat while revenue grows 5.5–6.5%, or whether the wholesale beat was channel fill that appears as inventory next quarter.
The Multi-Year Arc
| Period | Revenue | Net income | Net margin | DTC share | Inventory | Total assets | | --- | --- | --- | --- | --- | --- | | FY2021 | $5,760M | $817M | 14.2% | 38.2% | $645M | $3,800M | | FY2022 | $6,190M | $880M | 14.2% | 40.1% | $648M | $3,950M | | FY2023 | $6,210M | $882M | 14.2% | 42.3% | $652M | $4,050M | | FY2024 | $6,100M | $866M | 14.2% | 43.8% | $658M | $4,150M | | FY2025 | $6,280M | $892M | 14.2% | 44.8% | $660M | $4,200M | | Q2 FY2026 | $1,690M | $230M | 13.6% | 46.2% | $645M | $4,300M |
The five-year arc is a denim maker compounding at 2% annually — not because Levi found a new product, but because it shifted from wholesale to DTC. Revenue grew from $5.76 billion to $6.28 billion while DTC share went from 38.2% to 46.2% — that 800-bp shift is the entire margin story. The ledger forces that relationship to be explicit — revenue is a single line that must reconcile to expenses, so a claim of DTC leverage cannot coexist with a hidden wholesale discount in CostOfRevenue. Through Q2 FY2026, it does not — gross margin expanded from 57.2% to 58.4% as DTC expanded. The question for the second half is whether DTC can reach 48% while wholesale holds, because that is the only path to the 5.5–6.5% guidance without adding stores.
The Verdict: Bull vs. Bear
Bull Case
- DTC mix shift is structural: DTC grew 11% vs wholesale 6.1%; that 490-bp spread has held for four consecutive quarters.
- Gross leverage is 90 bps: CostOfRevenue 42% vs 42.2% a year ago — DTC mix more than offset cotton.
- Inventory is flat: $645M vs $648M a year ago despite +8.3% revenue — sell-through, not channel fill.
- Guidance raise is the first in two years: 5.5–6.5% vs 4–5.5% prior; management does not raise unless DTC is durable.
- Beyond Yoga/Dockers +12.3%: Diversification beyond the red tab is growing faster than the core.
Bear Case
- Wholesale 6.1% could be pull-forward: Q2 is the wholesale order book for back-to-school; Q3 may give it back.
- Europe +8.6% is FX-assisted: Constant-currency Europe was +5.1%; the beat has 350 bps of euro tailwind.
- Operating margin 12.7% below full-year 13%: Marketing behind summer campaign is front-loaded; leverage must show in H2.
- Asia +7.6% lags peers: At 16% of revenue, it is the diversification engine that is growing slowest.
- Denim is cyclical: A consumer slowdown hits discretionary apparel first, and DTC is the first channel to see it.
Our Take
Our take: the quarter earns its raise. Levi grew revenue 8.3% and EPS 27% while holding inventory flat and expanding gross margin — that is DTC leverage, not wholesale fill, and the ledger confirms it: revenue at 1.69, CostOfRevenue at 709, and the check sums to zero — no wholesale rebate is hiding in OtherNet. The bull case is that DTC can reach 48% by year-end while wholesale holds, giving the 5.5–6.5% guidance a 50-bp cushion; the bear case is that wholesale 6.1% is a pull-forward that reverses in Q3. We lean bullish for the next quarter because inventory flat on +8.3% revenue is not a channel-fill tell — it is sell-through — but we would watch inventory. If it prints $700M in Q3, the beat was fill. For now, it is a 171-year-old brand acting like a DTC platform, and the plain-text ledger lets you verify that, dollar for dollar.
