To The Moon

$Levi Strauss & Co(LEVI)$ $Lululemon Athletica(LULU)$ $Nike(NKE)$ Levi Strauss delivered a decisive beat and raise, validating its DTC-first pivot and extending a four-quarter streak of high single-digit organic growth. The company set a credible path toward structurally higher profitability even with tariff and SG&A headwinds.

The cadence across geographies, categories, and channels signals a brand that is not merely weathering the macro backdrop; it’s compounding through it.

🐳 Unusual Options Flow

$74K premium swept into $LEVI 26C 17Oct25 contracts

• 1,153 contracts traded

• 1,019 open interest

• Average fill: $0.74 (about 5% OTM)

This flow hit just ahead of the print, indicating tactical bullish positioning into the post-earnings volatility window.

📊 Earnings Snapshot

• Adj. EPS: $0.34 vs $0.31 est (+10%), +3% YoY, +55% QoQ

• Revenue: $1.54B vs $1.50B est (+3%), +2% YoY, +7% QoQ

• Net Income: $122M

• Operating Margin: 10.8% (+370 bps YoY)

• 1Y Share Price: +20%

Shares initially fell about 5% AH on cautious Q4 guidance and YoY margin mix, before recovering as the call clarified strategic execution.

📝 Guidance vs Prior Guide

Q3 beat its own guidance across every line

• Organic net revenue: 7.0% actual vs 4.0–5.0% guide

• Adjusted EBIT margin: 11.8% vs 10.8–11.2% guide

• Adjusted EPS: $0.34 vs $0.28–0.30 guide

FY25 Raised Again:

• Organic revenue growth: ~6% (prior 4.5–5.5%)

• Reported revenue growth: ~3% (prior 1–2%)

• Gross margin expansion: +100 bps (prior +80 bps)

• Adjusted EPS: $1.27–1.32 (prior $1.25–1.30)

• Adjusted EBIT margin: 11.4–11.6% (maintained)

I’m framing this print as confirmation that Levi’s DTC flywheel is translating into profitable scale, not just headline beats. Gross margin expanded +110 bps to 61.7% on mix and pricing while DTC delivered high single-digit comp growth and more than 400 bps margin expansion. The quality of growth was unit-led rather than price-only, which strengthens durability.

🟢 What Is Working

• DTC-first acceleration with strong comps and +400 bps margin expansion

• Pricing power and channel mix pushed gross margin to 61.7% despite tariffs

• Asia +12% organic growth after being flat in Q2; Americas +7%; Europe +3% with double-digit exit rate as weather normalized

• Categories: Tops +9% (Men’s +10%, Women’s +8%); Levi’s Women’s +9%; Levi’s Men’s +5%

• E-commerce: +16%, with long-term goal to grow from 9% to 15% of sales

• Wholesale: +5.3% organic, with sell-through broadly matching sell-in

• Operational discipline: SKU count down ~15% YoY; globally common SKUs up to 40% (from <10%); SKU productivity up ~20%

⚖️ Bulls vs Bears

Bull case:

• Four straight quarters of high single-digit organic growth

• Guidance raised across revenue, gross margin, and EPS

• Asia rebound, DTC profitability proof points, unit-driven demand

Bear case:

• Adjusted EBIT margin declined to 11.8% vs 12.3% YoY

• Margin guidance held rather than raised

• Inventory dollars up 12% into the holiday period

🟡 Key Concerns

• SG&A intensity rose from performance-based comp, new stores, and parallel distribution costs

• Inventory +12% YoY (units +8%) into peak season; must convert cleanly

• Tariffs: Q4 assumes 20% Rest-of-World (from 10%) and 30% China, an 80 bps GM headwind

• Q4 cadence: Organic growth guided ~1% as the company laps a 53rd week that added ~4 pts to revenue and 20 bps to gross margin last year; U.S. wholesale expected down on tough comp

🧭 Strategic Lens

Management laid out a path to 15% adjusted EBIT margin:

• +200 bps from structural gross margin expansion

• +200 bps from SG&A leverage

• −50 bps from reinvestment in marketing

The Japan model, ~75% DTC mix and +50% growth since 2019, is the template for Asia. Distribution costs remain elevated (~7% vs historical 5%) while dual facilities run, but normalization is expected by end Q1 2026.

I am treating the tariff reset as a timing headwind rather than a thesis change. With better cotton costs locked in and targeted pricing intact, the model retains multiple paths to margin expansion as distribution normalizes.

💰 Margins and Profitability

• DTC profitability expanded >400 bps

• Unit-driven growth underpins demand strength

• Distribution costs at ~7% of sales vs ~5% historically; expected normalization by end Q1 2026

🛍️ Category and Channel Performance

• Tops +9% overall (Men’s +10%, Women’s +8%)

• Levi’s Women’s +9%; Women’s wovens +37%; dresses/jumpsuits +20%

• E-commerce +16%, with clear long-term targets

• Wholesale channel sell-through remains healthy

🌍 Regional Commentary

• Europe: +3% on poor weather early in the quarter; accelerated to double-digit growth exiting the quarter. Spring pre-books are mid-single digits.

• Asia: Broad-based double-digit growth in India, Japan, Korea, and Turkey.

• Americas: Steady +7% organic growth.

📅 Q4 Guidance Context

Q4 organic growth guidance of ~1% is prudence, not weakness, due to the 53rd week lap and tariff adjustments. September trends were described as strong. U.S. wholesale is guided down YoY on the comp.

🧮 Q2 Trajectory for Context

Q3 builds on strong Q2 momentum:

• Revenue $1.36B → $1.45B (+6.4%)

• Gross Profit $832M → $905M (+8.7%)

• Operating Income $21M → $108M (+414%)

• Net Income $18M → $67M (+272%)

• EPS $0.04 → $0.17 (+325%)

This is an acceleration, not a reset.

📈 Technical Picture

4H Chart: Rode upper Keltner/Bollinger bands into earnings, then flushed to correction bands at $22.62 AH.

Weekly: Reclaimed the long-term moving average for the first time since 2021, completing a multi-year base.

Key Levels:

• Support: $22.00, then $21.20

• Resistance: $24.90, then $26.00

• A sustained close above $24.90 with volume opens $26.80–27.50

👉❓If DTC mix pushes toward 55–60% by 2026 and e-commerce reaches 15% of sales, does Levi’s hit 15% EBIT margin earlier than planned once distribution costs normalize, or will tariffs keep the target anchored to late 2026?

🟢 Why the Bull Case Leads

Four consecutive quarters of high single-digit organic growth, structural DTC profitability lift, broad-based geographic acceleration, pricing power, and raised guidance in a tough macro environment give the bull case dominance. SG&A and tariffs are execution variables, not structural breaks.

🧵 Fun Fact

Levi Strauss invented the blue jean in 1873. 152 years later, it’s still growing globally while modernizing its business model. Very few apparel companies achieve this level of reinvention.

🧠 My Trading Framework

I'll respect the post-print volatility pocket.

I will add on controlled pullbacks into the mid-22s if volume dries and buyers defend mid-Keltner zones.

I will chase only on a strong reclaim and hold above $24.90 with volume expansion and a 4H MACD re-cross.

The whale 26C flow into 17Oct25 is my near-term sentiment tell.

📝 Strategic Takeaway

This is a beat and raise that matters.

The DTC engine is compounding. Margins are expanding despite tariff drag. Asia has shifted from a watch item to a growth pillar. SKU discipline, mix control, and execution strength are unmistakable.

I see a credible glidepath to mid-teens EBIT as distribution costs normalize and digital mix climbs. This is exactly what durable apparel compounders look like when they get strategy right.

I’m grounding this view in structured scenario analysis, not speculative forecasts, to reflect where the weight of evidence truly lies.

📢 Don’t miss out! Like, Repost and Follow me for exclusive setups, cutting-edge trends, and insights that move markets 🚀📈 I’m obsessed with hunting down the next big movers and sharing strategies that crush it. Let’s outsmart the market and stack those gains together! 🍀

Trade like a boss! Happy trading ahead, Cheers, BC 📈🚀🍀🍀🍀

@Tiger_comments @TigerStars @Tiger_Earnings @TigerPM @TigerObserver