Levi Strauss sued over tariff refunds after booking $78.6 million
Key Facts
Law firm Cotchett, Pitre & McCarthy announced a lawsuit against Levi Strauss over tariff refunds that the plaintiffs say should be returned to consumers, as the company booked about $78.6 million in refunds during its fiscal third quarter. The firm accuses the company of retaining money the plaintiffs believe is owed to buyers, in a dispute over who is entitled to the refunds once collected. According to the firm's statement distributed through Business Wire, the claim concerns millions of dollars in duties the company has not returned to its customers. The refunds followed a U.S. Supreme Court ruling on the president's authority to impose tariffs under the International Emergency Economic Powers Act. The court said in its ruling that "the International Emergency Economic Powers Act does not authorize the president to impose tariffs."
In its filing with the U.S. Securities and Exchange Commission, Levi Strauss recorded the recognized refunds as a reduction in the cost of goods sold during the fiscal third quarter. This accounting treatment relates to duties the company previously paid under the International Emergency Economic Powers Act and subsequently recognized as refunds in its financial results. Cash actually received totaled about $57.1 million as of August 30, 2026, according to the filing, compared with the total refunds recognized. The company recorded the remaining amount as a receivable on its balance sheet, meaning the accounting total comprises both amounts collected and amounts still due. It added in the filing that it also recognized $4.7 million in interest income related to tariff refunds during the fiscal third quarter.
In its operating results, Levi Strauss reported an increase in gross margin to 66.2% in the fiscal third quarter, compared with 61.7% in the same period a year earlier. The refunds were recognized as a reduction in the cost of goods sold in the same quarter that saw this improvement in gross margin. Meanwhile, the company said in its earnings statement that it reinvested part of the refunds to support the business, including promotions and marketing. This spending added $25 million in expenses during the fiscal third quarter, according to the statement outlining how some of the money was used. The period's results thus included a reduction in costs from the recognized refunds alongside additional expenses from reinvesting part of them in the business.
The results coincided with performance below internal expectations in the direct-to-consumer business, according to Chief Executive Michelle Gass's comments on the company's results. Gass said "our direct-to-consumer business came in below our internal expectations," identifying that business as an area of weakness relative to management's expectations. Meanwhile, she attributed some of the strength in performance to international and wholesale operations, saying: "We saw strong growth in our international and wholesale businesses." Reuters reported that sales in the United States and Europe fell short of expectations when the results were announced, weighing on the shares in subsequent trading. The company's shares fell 2% in after-hours trading on October 7, 2026, following the results announcement, according to the agency.
Alongside its fiscal third-quarter results, Levi Strauss raised its annual earnings guidance, according to the company's statement, which also included share repurchase plans. It said in the statement: "We are raising our full-year earnings guidance and intend to launch a $100 million accelerated share repurchase program." The planned program was announced as part of the company's financial measures accompanying the results, alongside spending allocated to support the business using the refunds. The demand to return money to buyers was put forward by the law firm on behalf of the plaintiffs as the basis for the announced lawsuit against the company. Consumers' entitlement to this money remains an allegation by the plaintiffs in the dispute over tariff refunds the company recognized and partially received.
For the final fiscal quarter, Levi Strauss's guidance includes reinvesting about $35 million of the refunds, according to the spending plan in its earnings statement. This amount is part of about $60 million the company intends to reinvest over the full fiscal year to support its business. The final-quarter allocations extend the reinvestment announced by the company in the fiscal third quarter, which included promotions and marketing. Regarding subsequent stages of recovery, the company said in its filing that it continues to assess tariff recovery in the next stages of the process. It added that it "continues to assess recovery of losses related to tariff refunds in subsequent stages," alongside its guidance for using the funds over the remainder of the fiscal year.