Investors Find a Fashion Faux-Pas in Levi’s Upbeat Earnings

Sometimes, markets can be a harsher judge than the fashion police.  

Levi Strauss & Co. reported top- and bottom-line figures Wednesday that beat Wall Street’s second-quarter forecasts, hiked its earnings guidance and increased its dividend. Shares in the jeansmaker nonetheless fell 5% in after-hours trading. With demand for denim steady, why did investors react like it’s cheap rayon?

Denim Doubters

Under CEO Michelle Gass, who took the top job in 2024, Levi Strauss has pursued a multifaceted turnaround, pivoting to a higher-margin, direct-to-consumer model to offset reliance on wholesalers. This has included moving Levi’s distribution to a combination of owned and third-party locations from a purely owned-and-operated setup, something that will lead to the closure of a Kentucky distribution center, and the loss of some 300 jobs, next month. Most importantly, it’s working: DTC grew 10.5% in the company’s 2025 fiscal year, and 11% year-over-year in this year’s second-quarter results reported Wednesday.

It’s also gaining broader momentum: Companywide, revenue climbed 3% in Gass’ first year, then 4% in 2025 to $6.3 billion. In the most recent quarter, sales rose 8% to $1.6 billion, and profit of $87 million increased 30% from a year ago. All of these things bested analyst expectations, but the price of success is that investors start to expect more:

• Levi’s raised its sales growth forecast for the fiscal year ending November 29 to 7.0% to 7.5%, up from 5.5% to 6.5% previously. 
• The company expects earnings of roughly $1.46 to $1.52 per share, with a $1.49 midpoint just below the $1.51 forecast from analysts surveyed by FactSet. That narrow miss was enough to send the stock careening, with investors making like Richard Blackwell on a bad morning.

Riding Higher: Levi’s hiked its quarterly dividend by 14% to 16 cents per share, or 64 cents a year, delivering an annual yield of about 2.6% based on the stock’s Wednesday closing price of $24.37. That’s better than the S&P 500’s roughly 1% and within the Goldilocks range that financial advisors consider relatively stable.