Levi Strauss & Co. (LEVI) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Levi Strauss & Co. second quarter fiscal 2026 earnings conference call for the period ending May 31, 2026. [Operator Instructions] This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. This conference call is being broadcast over the Internet and a replay of the webcast will be accessible for 1 quarter on the company's website, levistrauss.com. I would now like to turn the call over to Aida Orphan, Vice President of Investor Relations at Levi Strauss & Co.

Thank you for joining us on the call today to discuss the results for our Second Quarter of Fiscal 2026. Joining me on today's call are Michelle Gass, our President and CEO; and Harmit Singh, our Chief Financial and Growth Officer. We'd like to remind you that we will be making forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in our reports filed with the SEC. We assume no obligation to update any of these forward-looking statements. Additionally, during this call, we will discuss certain non-GAAP financial measures, which are not intended to be a substitute for our GAAP results. Definitions of these measures and reconciliations to their most comparable GAAP measure are included in our earnings release available on the IR section of our website, investors.levistrauss.com. Please note that Michelle and Harmit will be referencing organic net revenues or constant currency numbers unless otherwise noted, and information provided is based on continuing operations. Finally, this call is being webcast on our IR website, and a replay of this call will be available on the website shortly. Today's call is scheduled for 1 hour. [Operator Instructions] And now I'd like to turn the call over to Michelle.

Thank you, and welcome, everyone, to today's call. We're pleased to report another strong quarter with Q2 exceeding expectations across the top and bottom line. These results highlight the strength of our business model, underpinned by the enduring power of our iconic brand and how we're driving growth across markets, channels, categories and consumer demographics. The progress we're delivering today is the direct result of the strategic choices we've made to sharpen our focus and unlock the full potential of the Levi's brand, choices that have positioned us to capture our highest return growth opportunities. As we continue to evolve into a DTC-first lifestyle company, we are driving more consistent and faster growth, expanding our addressable market and improving our profitability. Quarter after quarter, our results demonstrate that our strategies are working and momentum is building. And we believe we are still in the early innings of unlocking the full opportunity ahead with more ways to win than ever before. Let's now turn to the details of the quarter. As a reminder, all numbers Harmit and I will reference are on an organic basis. We delivered solid top line performance this quarter with organic net revenues up 6%. Our international markets continue to demonstrate strong momentum, led by a 12% increase in Asia, while the U.S. delivered a 6% increase. Our direct-to-consumer business continues to lead our growth with revenue up 8% and comparable sales up 6% in Q2, delivering our 17th consecutive quarter of comp growth. Global wholesale increased 3%, led by strength in the U.S. wholesale channel. Our evolution into a denim lifestyle brand is enabling us to continue to drive outsized performance in women's, up 11% in the quarter, and we further extended our leading market share position in both men's and women's, reflecting the strength of our brand, impactful marketing and a steady pipeline of product innovation. Importantly, top line momentum translated into strong bottom line delivery with margin expansion and strong earnings growth. On the strength of our performance, we're raising our full year sales and EPS guidance. Harmit will share more shortly. I'll now walk you through highlights from the quarter in the context of our strategies. Our first strategy is to be brand led, powered by a best-in-class global marketing team that moves with agility and keeps Levi's firmly at the center of culture around the world. In Q2, we continued to build on our global Behind Every Original campaign following its successful launch of the Super Bowl earlier this year. The campaign features a dynamic mix of cultural voices across music, sports and fashion, including Doechii, Questlove and basketball superstar SGA. In line with our strategy to align global campaigns with local relevance, we expanded the talent roster to include top local talent across key markets, include Mexican pop star and actress Belinda and leading Bollywood actress Alia Bhatt. We also activated our collaboration with K-pop superstar and Levi's brand ambassador ROSÉ through pop-up shops in key Asian markets, reinforcing our focus on growing the women's business in the region. Ahead of the global soccer championship, Levi's launched denim product collaborations with the U.S., Mexico, England and France Football Federations. And when the soccer championship came to Levi's Stadium in June, our team turned a branding restriction into a viral marketing campaign, demonstrating our ability to operate at the speed of culture through bold, agile execution. This drove the most viewed, shared and commented post in Levi's history, generating approximately 1 billion press impressions. Now turning to product. As I mentioned earlier, we remain in the early innings of capturing a significant opportunity ahead, and our product engine rooted in denim is central to unlocking that growth. For more than 150 years, denim has anchored the global wardrobe, outlasting virtually every trend in fashion. It began as practical workwear and yet has become a global symbol of style and self-expression. Today, the continued trend toward casualization is a structural tailwind fueling denim growth globally. And the category is projected to grow mid-single digits annually through 2030, outpacing the category's historical growth. As the global market share leader in denim, Levi's is uniquely positioned to capture this opportunity, and we are accelerating that capture through a steady pipeline of innovation in fit and fabrics. In Q2, our bottoms business grew 6% driven by strength in core fits with newness adding incremental momentum. Looser silhouettes continued to deliver solid growth. Our 501 '90s for her and 501 Loose for him were key standouts in the quarter, reinforcing both the longevity and relevance of our core icons. We're also seeing continued strength across a range of other silhouettes, including our Cinch Baggy franchise, Wide Leg and Low Loose in women's, and Relaxed and Bootcut in Men's. Importantly, our core fits across skinny, slim, bootcut and straight continue to make up the majority of our bottoms business, reflecting our healthy and diversified bottoms portfolio. Our push into categories beyond denim bottoms has expanded our total addressable market and contributed roughly 1/3 of our top line growth in the quarter. This reflects our strong progress in expanding our assortment for summer, creating more warm weather head-to-toe offerings for our consumers. We're seeing strength across key summer categories, including lightweight denim, linen shirts and dresses. Our expanded shorts assortment is also resonating with the category up 11% in the quarter. In women's, we also saw exceptional strength in seasonal trends, including white denim, which grew 70%. Strong in-store execution is bringing these assortments to life through compelling merchandising, outfitting and seasonal storytelling. We're making great progress in our evolution into a true head-to-toe denim lifestyle destination and our tops business remains a meaningful opportunity to expand our total address market. In Q2, tops were up 5% or up 7% when excluding the impact of the European distribution center transition last year. Newer categories like blouses, wovens, sweaters and polos are driving strong growth, outpacing legacy categories like graphic tees. As these legacy categories continue to mature within our portfolio, we're actively refining how we invest across our traditional and newer styles to maximize the opportunity, and we expect the business to accelerate in the second half of the year. Blue Tab continues to gain traction as the most premium expression of our brand. Importantly, Blue Tab is introducing the Levi's brand to a new consumer, and we are already seeing early share gains at the premium end of the category. While still in the early stages, we see significant runway ahead as we scale the business, unlocking a sizable premium segment that remains underpenetrated for Levi's today. Now shifting to our strategy to become a best-in-class DTC-first retailer. Our global direct-to-consumer business was up 8% in Q2 and comprised 51% of total company revenue in the quarter. Comparable sales were up 6%, underscoring the strength of our retail execution with gains across key store KPIs, including UPT and AUR. Our continued efforts to premiumize the site experience and elevate our online assortment drove another strong quarter in our e-commerce channel, up 17%. E-comm growth was fueled by solid performance across all key metrics including increased traffic, better conversion, higher UPT and AUR growth as we reduced promotional activity on our site. This business has grown almost 60% over the past 3 years yet still only comprises approximately 12% of our overall revenues, remaining underpenetrated versus peers and representing a meaningful opportunity for continued growth. This quarter, we welcomed 3 million new members to our loyalty program, bringing global membership to nearly 50 million. We're continuing to enhance the program through more personalized experiences and leveraging our data to deliver more relevant and connected interactions. Global wholesale was up 3%, reflecting strength across customers in U.S. wholesale. The women's business was a particular standout, and sellout trends across the U.S. wholesale channel remain healthy. Globally, our wholesale partners are increasingly leaning into our diversified lifestyle assortment, reflecting strong consumer demand and confidence in our broader offerings. Now turning to our third strategy, powering the portfolio. While international represents approximately 60% of our business today, we see significant runway ahead with many markets still early in their growth journey. This quarter, international revenue grew 6%, led by double-digit gains in Asia and Latin America. This year, we celebrate 60 years of the Levi's brand in Mexico, our second largest market globally and a key contributor to international performance with Q2 growth of 15%. Supported by strong brand equity, Mexico remains both a meaningful revenue driver and a cultural and strategic hub. Across Latin America, momentum is accelerating with double-digit growth led by Brazil, the Andes and Colombia. We see continued opportunity to build on this strength through store openings, e-commerce and wholesale expansion. In Asia, performance was strong across markets with Q2 growth led by Turkey, Japan and India. In China, we are beginning to see signs of progress supported by new leadership and improvements in product and execution. While still early, we're encouraged by a return to growth and improving underlying trends. Signature, our value-focused brand grew at a low single-digit rate in Q2 and was up 9% for the first half of the year. We expect growth to continue and build through the second half of the year, supported by an expanded lifestyle assortment including a broader tops offering. Beyond Yoga was up 16%, led by strength in e-commerce. Momentum continues to be fueled by newness and expansion into lifestyle categories including the launch of a new linen capsule, which quickly became one of the brand's top-selling collections. In closing, this quarter again reinforces the strength of our strategy and the progress we're making. We've sharpened our focus, elevated the Levi's brand and raised our level of execution, building a stronger and more durable business. While we remain mindful of the external environment, the momentum we're seeing across our strategic priorities gives us confidence in the path ahead. I want to thank our teams around the world for their relentless focus on the consumer and the disciplined execution that continues to drive our results. With that, I'll turn it over to Harmit. Harmit?

Thank you, Michelle. Q2 was another strong proof point that our profitable growth algorithm is working. We exceeded expectations on both the top and bottom lines, expanded margins, delivered strong EPS growth and generated significantly stronger free cash flow. This quarter once again reflected the power of the and, growth across wholesale and DTC, the U.S. and international, women's and men's, tops and bottoms, units and AUR. Our recently expanded TAM contributed roughly 1/3 of revenue growth, reinforcing the traction of our denim lifestyle strategy. Improving flow-through remains a priority, and Q2 showed clear progress. Gross margin expanded despite pressure from tariffs and disciplined SG&A management converted top line growth into stronger-than-expected bottom line delivery. Given our solid first half performance and business momentum, we are passing the entire Q2 beat and raising our full year revenue and EPS outlook for the second consecutive quarter. I'll walk you through the details shortly. Before discussing Q2 results, I'll update you on 2 infrastructure initiatives that support our transformation into a DTC-first lifestyle company. First, an update on our distribution network transformation. We completed the remap of Europe to an omni-channel distribution network at the end of quarter 2, consolidating e-commerce fulfillment into our distribution centers in Germany and the U.K. We are seeing benefits in operational efficiency, distribution expense leverage and profitability in Europe. In the U.S., we remain on track to complete the transition of Hebron, our own distribution center to Maersk by the beginning of the fourth quarter. The transition has taken longer than planned as we balanced strong demand with the operational shift. As we exit parallel operations and consolidate into the new network, we expect to eliminate duplicated costs, simplify the operating model and improve inventory and service levels. We also reached a major milestone in our global ERP transformation, migrating Asia and Beyond Yoga onto our new global platform after the successful transition in North America. Europe and the remaining Latin American countries are on track for completion by mid-2027. Once complete, the company will operate on a single ERP, enabling faster decision-making, supporting our DTC-first model, all while creating the foundation to scale AI and automation globally. Now moving to our Q2 results. Net revenues increased 8% reported and 6% organic. This is despite a 2 point drag from last year's Europe distribution center transition. Gross margin was better than expected and expanded 10 basis points to 62.7%, Lower product costs and pricing actions were tailwinds. Tariffs and foreign exchange were a headwind in the quarter. Adjusted SG&A increased 6.5%, primarily reflecting higher selling expenses and unfavorable foreign exchange. As a percentage of revenue, however, adjusted SG&A leveraged 80 basis points, underscoring the discipline and scalability of our cost structure. As a result, adjusted EBIT margin expanded 70 basis points to 9%, reflecting our ability to convert top line growth into margin expansion. Adjusted EBIT dollars also grew 18%, much faster than revenue growth. This flow-through drove adjusted diluted EPS of $0.28, ahead of our guidance and represented growth of 27% year-over-year. We ended Q2 with inventory down 7% with a healthy mix of current products across regions, reflecting stronger inventory management and continued progress in reducing excess and obsolete. For the full year, we expect inventory dollars to be slightly above last year but below expected sales growth, positioning us to service back-to-school and holiday demand. Building on a strong Q1 performance, in quarter 2, adjusted free cash flow increased nearly 60% year-over-year to $231 million, driven by business momentum and improved working capital. Turning to our capital allocation strategy. Our approach remains disciplined and balanced, prioritizing high ROI growth opportunities while returning at least 55% to 65% of free cash flow to shareholders through dividends and opportunistic share repurchases. In 2026, our capacity to return capital is even stronger supported by Dockers sales proceeds and execution of our ASR. Consistent with this commitment, we are increasing our quarter 3 quarterly dividend by $0.02 to $0.16 per share, double our annual increase over each of the past 2 years, reflecting confidence in our earnings and free cash flow generation. Now let's review the key highlights by segment. The Americas delivered 7% growth, with the U.S. up 5% on momentum in both DTC and wholesale. Operating margin declined 40 basis points, driven by the unfavorable impact of tariffs and the favorable impact of cost initiatives and pricing actions. Europe declined 1% in quarter 2, reflecting last year's distribution center transition, while first half revenue grew mid-single digit, consistent with our full year guidance. Underlying trends remain healthy with DTC up 7% and strength in key markets, including Germany and the U.K. Q2 operating margin increased nearly 400 basis points to 21.1%, driven by gross margin strength and lower distribution expenses. Looking ahead, we are encouraged by high single-digit wholesale preorder growth for H2. Asia net revenues increased 12% fueled by double-digit growth across both DTC and wholesale. Performance was strong across markets as consumers continue to gravitate towards our expanded denim lifestyle assortment. Operating margin was 15%, expanding 350 basis points versus prior year, driven by revenue acceleration, gross margin strength and SG&A leverage. Now turning to guidance. Based on our strong first half performance and business momentum, we are raising our full year outlook. The tariff environment continues to be uncertain, and our updated guidance continues to assume incremental U.S. tariffs on imports from China at a 30% rate and the rest of the world at 20%. Our guidance does not assume any benefit from potential tariff refunds, which are approximately $80 million paid to date. For the full year, we are raising our revenue outlook and now expect reported net revenues to increase 7% to 7.5% and organic net revenues to be up 5.5% to 6%. This assumes foreign exchange is 150 basis point tailwind to sales versus our previous expectation of a 100 basis point benefit, all of which has already been realized in H1. Gross margin is now expected to expand approximately 10 basis points to prior year, driven by the structural drivers of our business, higher DTC, women's and international, along with reduced promotional levels and cost efficiency. We expect adjusted EBIT margin to be 12% for the full year, a continuation of the sequential margin improvement we have seen over the past several years while taking proactive decisions to reinvest in the infrastructure investments that I highlighted earlier and net new store openings. And we are raising our adjusted diluted EPS expectations by $0.04 to the range of approximately $1.46 to $1.52, up from our previous range of $1.42 to $1.48. And with regards to store openings, we continue to expect to open 50 to 60 net new doors this year with the majority of net openings weighted to the second half of the year. For quarter 3, we expect reported and organic net revenues to be up 4% to 5% for the quarter, reflecting no expected benefit from foreign exchange. Gross margin is expected to expand around 10 basis points versus prior year to 61.8% despite a roughly 70 basis points FX headwind. Adjusted EBIT margin leverages approximately 10 basis points to 11.9%. This translates to an adjusted diluted EPS of approximately $0.34 to $0.36, which includes a $0.02 to $0.03 headwind from a higher tax rate and foreign exchange impacting gross margin. A few comments on the phasing of EBIT margins in the second half. H1 margins adjusted for the Q1 timing of A&P were up 30 basis points. We expect that progression to continue into Q3. The EBIT expansion becomes more pronounced in Q4 as we begin to lap the full impact of tariffs in Q4 last year, less FX pressure on gross margin, the normalization of A&P spending, reduced duplicative distribution costs and continuing to drive SG&A discipline. The underlying message is consistent. We are converting revenue growth into higher earnings and stronger profitability and as a result, we expect to end the year with adjusted EBIT margin up 60 basis points, continuing our trajectory over the last 3 years. In closing, our results demonstrate a healthy long-term growth algorithm with mid-single-digit revenue growth, expanding margins, strong earnings acceleration, healthy cash flow and disciplined capital returns. With a strong first half and positive business trends, we are passing through the Q2 beat and raising our full year top line and bottom line outlook for the second consecutive quarter. We remain confident in our path to $10 billion in revenue and 15% operating margin supported by an expanded TAM and a clearer road map for profitable growth. And with that, I'll open the line for Q&A.

[Operator Instructions] Our first question comes from the line of Laurent Vasilescu of BNP Paribas.

I've got 2 questions here. First is on U.S. wholesale. I think you mentioned Signature grew high teens last quarter. I think it was up low single digits this quarter. Curious to know what you're seeing with the more value-based consumer and channel overall? And then the second question is on Europe. Europe DTC grew 7% organically this quarter versus 5% last quarter. So DTC is actually accelerating. Curious to know what you -- how should we think about European DTC for the third quarter? And are you still confident that Europe as a whole should grow mid-single digits in the second half with prebook still up high single digits?

Great. Thanks, Laurent, for your questions. I'll take the first one on Signature and then pass it over to Harmit on Europe. So overall, we see Signature as an important business for us. It is on the smaller side, about $300 million annually, and we do expect it to accelerate in the back half. But I do think it's important when we look at this quarter relative to Q1, you take that in total and Signature was up 9% in the first half. And so we see that in the second half being either high single digits, low double digits, and we see a lot of opportunity. It's a solid, resilient business. They're taking sort of a page out of a called the Levi's Red Tab playbook and really leaning into newness, into lifestyle offerings, and that's resonating. We see opportunity in top in the women's business in particular. In Signature, women's is only 30% of the business. And so we see an outperformance there with women's, and we expect that to continue. So I think to your question on the health of that value-based consumer, we're optimistic there. And in fact, I think, overall, our consumer is proving to be quite resilient. Signature satisfies important part of our segmentation strategy on that more value-oriented consumer, but we're seeing help with that consumer, with our core consumer and even on the premium side of things. So with wholesale, you'll always see some variations quarter-to-quarter. Really important to look at it in the totality, and like I said, 9% first half, and we're expecting that to accelerate in the back half of the year. And then over to Harmit on Europe.

So Laurent, on Europe, so Europe, as you know, given the timing of Dorsten last year, which is the distribution center, which is off to the races, I'll talk about it in a second, but Europe was up 5% in the first half. That's consistent with our full year guide. Demand remains strong, and the business is really driving margin expansion as my remarks reflected. The strength is across most markets, which includes the U.K., Germany and Italy. So if you just take Dorsten, what's the impact of Dorsten in quarter 2? It's about 8 percentage points. So Europe in sort of minus 7 would have been -- sorry, minus 1 would have been plus 7, so that's Fact #1. To your question about DTC, DTC has accelerated in quarter 2. And your question about Q3 and 4, we expect DTC to be mid- to high single digits. I mean, that's the expectation. But wholesale is a big piece of the business. And as you heard from my remarks, our prebooks are up high single digits, reinforcing confidence in H2 and the full year outlook. So that's our perspective. I just want to spend a minute on profitability. You heard it in the prepared remarks. Our gross margins are up over 300 basis points. Distribution costs are down 100 basis points because the entire -- the vision of what we're trying to do on distribution is coming to life, and Europe was the first to go at it, and operating margins are up dramatically. So I think overall, Europe is in a good spot. And unlike some of the other folks, we're not seeing that and we are ready for the hot weather, warm weather Michelle reflected in her remarks.

Our next question comes from the line of Matthew Boss of JPMorgan.

Congrats on another nice quarter. Two-part question. Michelle, 6% organic revenue growth on top of 9% a year ago, could you speak to areas of strength that you're seeing across categories and elaborate on the expansion in the brand's total addressable market that you cited is tied to the expanded assortment? And then, Harmit, if you could just walk through drivers behind the sequential moderation that you embedded in the back half revenue outlook, I think it's roughly 4% relative to the front half, up roughly 8%. Just any change in consumer behavior to date that you've seen across regions? Or is this just more taking a proven outlook?

Yes. So I'll kick it off with what we're seeing to date. So I think what's really exciting, Matt, is that we are seeing broad-based growth. We're seeing it across channels. genders, categories and geographies. And it's a direct reflection of our strategy continuing to fuel that momentum. If you take channel, as an example, both DTC and wholesale were again positive in the quarter, as you know, DTC up 8%, wholesale of 3%. And wholesale actually contributed more to the beat if you will, but as expected, we expect DTC to be that outperformer as we continue to have a lot of runway there. If you take gender, again, fantastic quarter on women's, up 11%, double digit again, with a steady growth in the men's business, which is highly mature. It's worth mentioning on men's and women's, I did mention it in my prepared remarks, but #1 market share position and gaining share. And this is on the bottoms business, not even speaking to our expanded addressable market. So we're really pleased with that category. Again, we saw growth in both tops and bottoms, bottoms up 6%, tops up 5%, but we were impacted by this Europe Dorsten distribution shift, so it was actually up 7%. I think what's really great on both fronts is that we're seeing innovation fuel the growth on both tops and bottoms. On bottoms, while we have a solid business and more traditional fits, we're seeing loose, baggy, new fabrications drive momentum. Tops, we're seeing outperformance in these newer categories that really complete the head-to-toe outfitting, blouses, button downs, polos, sweaters, all outperforming. And then geographies. Again, very exciting U.S. market, up 6% overall looking at all of our brands, Levi's and Beyond Yoga, even Levi's is very solid, up 5% and then up 6% international with a big outperformance on the Asia side, as you heard, 12%. So this is the kind of report we like to share because it's all working. And then it really does speak to in this chapter of Levi's where we're really leaning into head-to-toe denim lifestyle. And you mentioned it. Our expandable -- our expanded TAM is significant. We're going from playing in the denim bottoms business to apparel with a very focused view on what fits in our vision of head-to-toe denim lifestyle. And I think the team is doing a great job. And we've got a lot of upside. And as we sit here today, the consumer is responding, and we have more ways to win than we've ever had.

So second question, I think there was 2 parts to the second question. What's the moderation? Is it prudent? Is it conservative? And then what's the health of the consumer? Let me start with the consumer. Our consumer continues to be resilient as reflected in another quarter of strong results. It's broad-based across channels, geographies and categories. So you think of the beat, geographically, it came from the U.S. and Asia. Europe was as expected. It came from wholesale, and it came from women. Demand is really healthy because 2/3 of our growth is driven by more units, and that's largely the expanded TAM and the underpenetrated areas of women and tops. So that's Point #1. Second is we are seeing strength across value, core and premium. Levi's Red Tab example, grew 5% or 6%. Signature, we expect -- this is just largely a timing. We expect second half to be strong. And Blue Tab is just getting started. And so that's the first piece. Yes, there is -- under the umbrella of the macro uncertainty, I think we're feeling good about it. To your question about second half versus first half, it is prudent. It is conservatism and it's probably maybe a couple of points on DTC and maybe a little more conservative on wholesale. Our job is to continue to beat as we have done. We take the last 7 quarters, Matt. We beat in the top line. We beat on the bottom line. We've raised our guidance for 2 quarters in a row on a full year basis. So our perspective is, as Michelle said, we have more ways to win. The power of the and that you've all heard, which is everything seems to be working, is what we hope carries us through the year.

Our next question comes from the line of Dana Telsey of Telsey Advisory Group.

It was muted. Sorry. Yes, congratulations and nice to see the progress everyone. On Beyond Yoga, you mentioned strength in e-commerce. How is Beyond Yoga doing in the stores? What do you see the game plan for that going forward? And the marketing has been very effective. Like you had music last year, a bit of sport this year. How are you thinking about marketing for the back half of the year? Any difference from overseas or by channel or region?

Fantastic. Okay. I'll take those 2 questions, Dana. So first on Beyond Yoga, we're pleased to continue to see that nice double-digit growth, up 15%, high teens again this quarter. And that's being driven by a combination of factors. It's product and really expanding beyond the traditional active wear like leggings and tanks and moving into lifestyle. And that's working. I mean they're seeing a lot of consumer resonance with casual pants, travel wear. Linen was a new platform they introduced this summer. It's done fantastic, tops, sweaters, dresses, so that's working. We called out e-commerce because that is the biggest part of the business to date, but we are optimistic on the multichannel approach. And you asked about stores. We're in the very early days. We have less than 20 stores, but we're learning a lot, and the newer stores that we're opening are working. There's a new merchandising approach. We're building slightly bigger stores, so we can bring the full expression. I would also say in Beyond Yoga's standpoint, men's is an untapped opportunity. And as we've been bringing the men's category forward, that consumer is responding. So there's a lot that we're excited about in Beyond Yoga. It's still early innings for this brand, but we see a lot of green shoots on the business. So that's one. And your second question is on the brand and marketing. And I tell you, the marketing team just continues to deliver. And every quarter, there are new ways for us to show up at the center of culture, and we do that globally. We do that locally. And we do have unparalleled brand heat around the world. And the strength of our brand, I mean, it's a massive competitive advantage and we do keep raising the bar. I think most recent example, of course, and still quite topical is around the World Cup. And here at Levi's Stadium, there was an opportunity when our logo got covered, the team saw that opportunity, leaned in and made that into a big moment for the brand by turning that on social media. It's our most viewed social media campaign. We're up to 1 billion press impressions. And we even took that through and taken that through our flagship stores around the world and covering logos, and we just launched T-shirts in a matter of weeks. So it just shows the power of this culture of being fast and agile and really maximizing the moment. So we'll continue to find those type of moments in addition to, this year, we're running our Behind Every Originals campaign. We're excited about what that's doing for the business. And while that's a global campaign, we're also bringing that local. So I think a great example is ROSÉ, who's K-pop star, is part of that campaign. We have now developed a collaboration with her in our Asian markets. And I think we were talking to our teams in Asia. They would say that, that is absolutely fueling the business, especially with women by doing pop-ups, the product collaborations, et cetera. So the last I would say to this is we are a brand-led company. It's an important part of our equation in winning along with product and execution, and we will continue to have this be a big part of what we do going forward. But the team is doing an outstanding job.

Our next question comes from the line of Jay Sole of UBS.

Great. My question is on the ERP implementation. You've made great progress, more progress. It sounds like it's going to be happening through the middle of next year. Can you just talk about when that process is finished, what it unlocks for the company, especially as you continue to move towards this DTC-first-led business? And what kind of impact might it have on margins when the ERP is implemented at this time with the distribution centers up and running the way you planned?

The -- I would say, I'm very bullish on this. I was the executive sponsor for a couple of years. And when I first joined the company 13 years ago, we had 9 ERPs. People said, let's get to one ERP. When I saw the bill, I said it's too much to spend. Let's work in turning around the business and growing the top line for us. So that's what we're focused on. But the fact of the matter is the team has done a phenomenal job. And it's a collaborative process. It's not just run by technology. It's business led, technology enabled and is -- we're moving from a very disjointed customized ERP system to a standardized ERP system that's on the cloud, right? And it was important to take the -- and take it to the cloud versus keeping it on premises. The success of the project, Jay, the way we have defined it, and this is something that the Board and we've partnered was the following. This is about unlocking data. It's about ensuring that the users get access to data and get access to data on time and on a regular basis. Example, if you think about our stores or you think about the data center -- the distribution center, on a screen on my iPad, I can see the movement of goods happening as they happen, right, what's the fill rate, what's the service, what's happening in sales. That was something we're not able to do. And now we can do North America. We can see what's happening in Asia. And to your question of when does this all complete, it probably is slated to complete by middle of 2027. The fact that we've got this far, knock on wood, without any major hiccups is a good thing. And so the size of the prizes we get there, you all have said, when you change your fiscal calendar, at least once we have an ERP, we have the foundation to get that to at least think through that and make that happen very quickly. So that's really how we're thinking. And it really helps us leverage AI because of the data unlock.

Next question comes from the line of Rick Patel of Raymond James.