Levi Strauss & Co. (NYSE: LEVI) is reinvesting most of an $80 million tariff refund back into the business instead of cutting prices. The company is betting that its new AI shopping assistant and e-commerce rebuild can help turn around its sluggish direct-to-consumer business.
No Price Cuts, Targeted Promotions
On its third-quarter earnings call Wednesday, the denim maker said direct-to-consumer revenue grew 2% with flat comparable sales, falling short of the company’s own expectations as traffic softened in the U.S. and Europe, according to President and CEO Michelle Gass.
CFO Harmit Singh said Levi’s is redeploying about three-quarters of the refund into marketing, supply chain improvements, and targeted holiday promotions. Around $25 million was spent in the third quarter, with about $35 million expected to be invested in the fourth quarter.
“It allows us to strengthen the business, support our near-term momentum, and still deliver on our annual growth algorithm,” said Singh on the company’s third-quarter earnings call.
Singh also said Levi’s did not lower prices even as some retailers did, choosing instead to promote around key holiday moments. He expects the extra promotional spending to taper in the fourth quarter and not carry into 2027.
“We didn’t take prices down. Some retailers have. We took it up,” said Singh, adding that they decided to do this because they provide “good price value.”
On Wednesday, Levi reported quarterly earnings of $0.48 per share, including a $0.16 impact from tariff refunds, which beat the consensus estimate of 36 cents, per Benzinga Pro data.
Quarterly revenue came in at $1.61 billion, which missed the Street estimate of $1.62 billion.
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Levi’s AI Stylist Is Already Changing How Shoppers Buy?
Gass said a new AI shopping assistant launched in the U.S. is still in its early days, but that shoppers who use it add items to their bag at roughly three times the average rate. The tool is part of a broader Levi.com overhaul, with a full redesign and platform migration on track for a global launch next year, according to the company.
Gass noted that once the revamp is complete, Levi.com will offer personalized experiences, outfit recommendations and other capabilities meant to convert more shoppers into head-to-toe lifestyle buyers.
“We’re seeing positive momentum in the business and continue to expect our DTC channel to grow at a high single digit rate for the full year, including mid single digit growth in the fourth quarter,” Gass added.
Shares of Levi closed 4.97% down to $19.51 on Wednesday. After hours, the stock fell about 1.85% to $19.15. Year-to-date, the shares have declined 5.93%.
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