Levi Strauss & Co. (NYSE: LEVI) beat in its fiscal second quarter. Reported net revenues of $1.56 billion topped the $1.52 billion consensus by about 2.6%. Adjusted diluted EPS of $0.28 came in roughly 15% above the $0.24 estimate. The numbers were strong enough for management to pass the full Q2 beat into full-year guidance and raise the dividend, an unusual move for a consumer brand in this cycle.
Reported revenue rose 8% year-over-year, or 6% organically. Adjusted EPS climbed 27% from $0.22 a year ago, fueled by a 10-basis-point gross margin expansion to 62.7% and SG&A leverage that pushed adjusted EBIT margin up 70 basis points to 9.0%. The operating margin story is worth parsing. Gross margin gained from lower product costs and pricing actions, even as tariffs and foreign exchange acted as a drag. That 10bps of expansion is modest, but it came despite a headwind most apparel peers are still absorbing, suggesting the underlying cost and mix dynamics are more favorable than the headline number.
The strategic narrative is the DTC shift, and the numbers back it up. DTC comparable sales growth accelerated to 6%. DTC now represents 51% of total net revenues, up from roughly 49% a year ago. E-commerce grew 19% reported (17% organic). This mix shift matters because DTC carries higher margins than wholesale. As the channel crosses the 50% threshold, the incremental revenue dollar is increasingly weighted toward that higher-margin channel. The company's guidance implies it sees this trend continuing: it raised full-year reported revenue growth to 7.0%-7.5% from 5.5%-6.5% and organic growth to 5.5%-6.0% from 4.5%-5.5%. Gross margin guidance was also raised to up 10bps year-over-year from flat to slightly up.
Regionally, the picture is mixed in a way that matters for the second half. Asia led with organic revenue growth of 12%, a strong signal for a brand investing in international expansion. The Americas grew 7% organically, with the U.S. up 5% reported. Europe, however, posted a 1% organic decline, which the company attributes entirely to a distribution center transition that shifted shipments from Q1 into Q2 2025. On a first-half basis, Europe organic revenues were up 5%, so the Q2 dip looks mechanical rather than demand-driven. It's a reminder that the European consumer environment remains uneven, and the company's guidance assumes no material macro deterioration.
The guidance raise is the most confident signal in the release. Adjusted diluted EPS guidance was lifted to $1.46-$1.52 from $1.42-$1.48, implying the company is comfortable that the Q2 beat is repeatable. The adjusted EBIT margin target of ~12% was reiterated, not raised, meaning the incremental revenue and gross margin improvement is being offset by planned investment spending. That's a reasonable trade-off if the investments sustain DTC momentum, but it also means margin expansion is gradual rather than accelerating.
Capital allocation reinforces the confidence. The company declared a $0.16 per share quarterly dividend, a 14% increase from the prior $0.14. The $200 million accelerated share repurchase launched in Q1 is expected to settle in Q3, and $240 million remains under the current authorization. With inventories down 7% year-over-year and cash of $849 million against $1.04 billion in long-term debt, the balance sheet has room for both reinvestment and shareholder returns.
The forward question is whether the DTC momentum can sustain the 6% comparable sales growth rate as the channel becomes a larger share of the mix. The law of large numbers applies: maintaining that growth requires an increasing absolute number of new customers and repeat visits. For now, the company's guidance implies it sees a clear path to doing so, and the Q2 print gives it credibility. The second half will test whether that confidence is warranted or whether the beat was pulled forward by timing. But for a consumer brand navigating tariff uncertainty and uneven global demand, passing through a beat and raising the dividend is a statement. The market will watch whether the next quarter's comps support it.