The Levi Strauss and Company first quarter fiscal 2026 earnings conference call discusses financial results, forward looking statements, and non-GAAP measures, emphasizing organic net revenues and ongoing operations. A replay of the webcast is accessible for one quarter on the company's website, and investors are encouraged to limit questions to allow others to participate.

The company reports robust Q1 financial results, driven by global growth and strategic focus, and outlines a seamless leadership transition as it raises full-year guidance.

Highlights Levi's 9% brand growth through Super Bowl activations, exclusive product drops, live music, and strategic collaborations with Nike, including a capsule collection and Nike Air Jordan 3 S, showcasing the brand's cultural relevance across sports, fashion, and music.

Levi's launches a groundbreaking global campaign, achieving strong brand awareness and media impressions. Product innovation drives growth in bottoms and tops, with new fits and fabrics. The DTC strategy yields double-digit sales growth, bolstered by e-commerce and a robust loyalty program.

Levi's reports robust global wholesale growth, driven by lifestyle assortment and strong partnerships. International markets, especially Europe and Italy, show significant momentum. The company's strategy of powering the portfolio with revitalized brands and expanded categories is translating into higher quality, more profitable growth. Despite external challenges, Levi's remains confident in its direction and progress toward profitability.

CEO announces retirement after successful transformation into a global, direct-to-consumer business. Q1 delivered strong results, with high-quality growth, better-than-expected profitability, and a 9% increase in net revenues. International business and women's categories led growth, with coda 1 26 revenue growth benefiting by $30 million due to distribution center timing. Gross margin slightly contracted year-over-year, but pricing actions and lower promotional activity offset impacts. The company is on track for long-term profitable growth.

Q1 saw a 16% growth in Adjusted SNA, driven by Amp, sales volume, and foreign exchange, with 90 basis points leverage excluding A and P. Marketing expenses remained flat at 7%, while productivity gains and AI initiatives supported business growth without increasing headcount. The Leadership Summit reinforced sgna discipline and profitability focus. Distribution expenses improved as a percentage of revenue, with the US network transformation on track. Excluding A and P, Adjusted EBIT margin was 14.1%, reflecting 40% flow through from higher revenue. Adjusted diluted EPS rose 11% to 42 cents. Inventory levels were deemed appropriate for spring. Shareholder returns surged 163% to $214M, including a successful Docker transaction and increased dividend, with free cash flow up to $152M, reinforcing the company's commitment to financial health and strategic focus on the Levi's brand.

Highlights key regional revenue growth, margin adjustments, and revised full-year guidance reflecting strong Q2 performance, with cautious macroeconomic outlook and potential tariff relief impacts.

The dialogue outlines Q2 financial expectations including revenue, margin, and EPS forecasts, emphasizing growth drivers and strategic adjustments for margin expansion, noting DDC's significant contribution and comp sales growth.

Levi's achieved strong organic growth, driven by strategic pivots and market responsiveness, with a focus on expanding denim lifestyle and enhancing profitability. Despite macroeconomic challenges in Europe and North America, the company forecasts sustained momentum, supported by innovative strategies and improved SGA expense management, aiming for enhanced value creation for stakeholders.

Discussion on the conservative guidance despite strong wholesale performance, highlighting better-than-expected business segments and future momentum prospects.

The company is adopting a cautious outlook, emphasizing top-line growth and converting more revenue into profitability. Despite a 19% tariff increase, gross margins are expected to rise. Wholesale performance, particularly in the US and Europe, has been strong, driven by increased purchases of women's apparel and tops. The company sees significant growth potential in underpenetrated markets and aims to expand from $6.5 billion to $10 billion over time.

The denim sector shows robust health, driven by innovation and fashion trends. AI and loyalty programs are enhancing consumer engagement, with e-commerce surging double digits. The industry anticipates sustained momentum through strategic advancements.

Discussion on Europe's Q2 revenue outlook, highlighting a $30 million shift mainly in wholesale, and the ongoing optimization of distribution costs, aiming for sustained improvement towards 5% of sales, with an emphasis on volume throughput enhancement and cost efficiency.

Discussion on Levi's performance in the US, noting strong sales post-Easter and the impact of the Super Bowl. Anticipation of World Cup events hosting by Levi's and potential effects on SG&A expenses are explored.

The company reports robust Q1 sales, with DTC and wholesale channels performing well, especially in the US. The signature brand saw a 16% increase, while new business grew by 40%. Enhanced merchandising and expanded assortments contributed to the success, showcasing resilience in the consumer market despite macroeconomic challenges.

The dialogue highlights the successful launch of a new brand campaign during the Super Bowl, resulting in 1.4 billion impressions. The strategy involves leveraging global and local influencers, with plans for future activations including World Cups and music collaborations, aiming for a 7% annual spend increase.

Discusses the brand's pricing strategy focusing on premiumization and innovation, noting no adverse consumer response to price hikes. Highlights efforts to reduce markdowns through improved allocation systems and supply chain execution, reinforcing brand strength.

A discussion on vendor strategies for handling freight rate surcharges, emphasizing locked-in rates through the year-end for ocean and air freight, with guidance reflecting potential increases.

Discusses how reducing product costs involves SKU rationalization, global assortment optimization, leveraging cotton price drops, and competitive vendor negotiations, aiming for a more efficient market calendar.

The dialogue discusses guidance for fiscal year 20 organic revenue growth of 4.5% to 5.5%, emphasizing an even balance between unit growth and Average Unit Retail (Aur). This strategy leverages market expansion into non-denim categories and new store openings to increase sales volume. Over time, the balance between units and Aur may shift, requiring annual guidance updates. The approach aims to capitalize on a significantly larger addressable market, now 15 times greater due to product diversification.

The dialogue discusses the distribution of Q1 results across months, noting a slight increase in January and February influenced by the Chinese New Year and European market timing. It maintains a positive quarterly trend, aligning with guidance, and indicates no significant regional accelerations or decelerations impacting the overall performance.

Asia's macroeconomic view highlights its resilience, particularly in China with a new team resetting the business. The region is underpenetrated, representing only 20% of the business despite housing half the world's population. Improved operating margins over the past few years are noted, with a focus on driving volume leverage. The consumer's preference for newness and a strong product pipeline are seen as key to continuing momentum, especially by offering good value at competitive price points.

Discussed regional growth in international markets, highlighting the shift from wholesale to DTC in the Americas, strong DTC presence in Asia, and balanced channel growth in Europe. Latin America's double-digit growth was noted, with future expansion plans for the Americas focusing on DTC store openings.

The call concludes with gratitude expressed towards participants, a reminder of the upcoming Q2 update in July, and instructions to disconnect lines, marking the end of the session.