Business Context and Reporting Period
Company: Levi Strauss & Co.
Filing Type: Form 10-K (Annual Report)
Fiscal Year Ended: November 30, 2025 (52-week year)
Reporting Period: Full Fiscal Year 2025 and Fourth Quarter 2025
Levi Strauss & Co. is a global apparel company operating primarily under the Levi's, Levi Strauss Signature, and Beyond Yoga brands. The company reported results for continuing operations, excluding the Dockers business which was classified as discontinued operations following the sale of its U.S. and Canada operations in July 2025. The Denizen brand wind-down was substantially complete as of March 2, 2025.
Key Financial Metrics
| Metric | Fiscal Year 2025 | Fiscal Year 2024 | Change |
|---|---|---|---|
| Net Revenues | $6,282.0 million | $6,032.0 million | +4.1% (Reported) / +7.2% (Organic) |
| Gross Profit | $3,877.8 million | $3,657.1 million | +6.0% |
| Gross Margin | 61.7% | 60.6% | +110 bps |
| Operating Income | $677.6 million | $262.7 million | +157.9% |
| Operating Margin | 10.8% | 4.4% | +640 bps |
| Net Income (Continuing Ops) | $502.0 million | $210.4 million | +138.6% |
| Diluted EPS (Continuing Ops) | $1.26 | $0.52 | +142.3% |
| Adjusted EBIT | $719.0 million | $645.4 million | +11.4% |
| Adjusted EBIT Margin | 11.4% | 10.7% | +70 bps |
| Cash from Operating Activities | $529.6 million | $898.4 million | -41.1% |
| Adjusted Free Cash Flow | $308.2 million | $670.9 million | -54.1% |
| Total Debt | $1.039 billion | $0.999 billion | +4.0% |
| Cash & Equivalents | $757.9 million | $690.0 million | +9.8% |
Material Changes vs. Prior Period
- Revenue Growth: Organic net revenues increased 7.2%, driven by growth in the Direct-to-Consumer (DTC) channel across all regions. Wholesale revenues decreased on a reported basis but were flat organically, impacted by the wind-down of the Denizen brand and footwear category.
- Profitability Surge: Operating income more than doubled, primarily due to a significant reduction in restructuring charges ($24.5 million in 2025 vs. $185.6 million in 2024) and goodwill/intangible impairment charges ($2.5 million in 2025 vs. $116.9 million in 2024).
- Discontinued Operations: The company sold the Dockers intellectual property and operations in the U.S. and Canada in July 2025, recognizing a gain of $139.0 million. Remaining Dockers operations are expected to close in Q1 2026.
- Restructuring: "Project Fuel," a global productivity initiative, was substantially completed. Charges dropped significantly year-over-year as the initiative moved from execution to stabilization.
- Cash Flow: Operating cash flow decreased significantly due to higher spending on inventory and SG&A, partially offset by lower restructuring costs. Adjusted Free Cash Flow declined due to the timing of working capital investments.
Guidance, Outlook, and Risks
Strategic Outlook: Management aims to deliver mid-single digit annual net revenue growth, targeting total company net revenue of $9 billion to $10 billion long-term, with Adjusted EBIT margins of approximately 15%. The strategy focuses on "Brand Led," "DTC First," and "Power the Portfolio" initiatives.
Capital Allocation: The company targets returning 55-65% of Adjusted Free Cash Flow to shareholders via dividends and share repurchases. A quarterly dividend of $0.14 per share was declared in January 2026. Share repurchase authority remaining as of January 23, 2026, was approximately $440.4 million.
Key Risks and Contingencies:
- Trade and Tariffs: New reciprocal tariffs and retaliatory actions have increased inventory costs and created uncertainty regarding future gross margins.
- Supply Chain Transition: Ongoing transition of distribution centers to third-party logistics providers may cause temporary disruptions, shipping delays, and increased costs.
- Macroeconomic Conditions: Inflation, consumer spending shifts, and foreign currency volatility (particularly the Euro and Mexican Peso) remain key risks.
- Impairment Risk: The Beyond Yoga reporting unit fair value remains less than 10% above its carrying value, creating a risk of future impairment charges if performance expectations are not met.
Investor Verification Checklist
- Organic Growth Quality: Verify the sustainability of DTC growth rates (10.5% organic) versus wholesale stagnation.
- Restructuring Completion: Confirm that "Project Fuel" cost savings are being realized in SG&A trends, noting that distribution transition costs may persist.
- Tariff Impact: Assess the magnitude of tariff-related cost increases on future gross margins, as management noted potential for significant reduction.
- Impairment Sensitivity: Monitor Beyond Yoga performance metrics closely, given the narrow margin between fair value and carrying value.
- Working Capital: Review inventory levels ($1.24 billion) relative to sales velocity to ensure no excess build-up is impacting cash flow.
- Debt Covenants: Verify compliance with the Credit Facility covenants, particularly the springing fixed charge coverage ratio, given the leverage position.