Levi Strauss & Co. (Levi Strauss (LEVI)) reported a solid second quarter that beat Wall Street estimates and raised its full-year guidance. So why did the stock drop more than 6% in premarket trading Thursday?

The answer is a classic case of "buy the rumor, sell the news." Before the earnings release, shares were trading near their 52-week high, meaning investors had already priced in a strong quarter. When the actual results came in—good, but not spectacular enough to justify a further rally—the stock took a hit.

Levi Strauss Second-Quarter Earnings

The company posted adjusted earnings of 28 cents per share, ahead of analysts' estimates of 24 cents. Revenue rose to $1.562 billion, topping the consensus estimate of $1.520 billion.

Organic revenue increased 6% year over year, driven by strong international demand, particularly in Asia. Adjusted EBIT margin expanded 70 basis points to 9%, while adjusted EBITDA climbed 18%. Inventories declined 7%, and the company ended the quarter with $849 million in cash and cash equivalents as of May 31.

International Growth Drives Regional Performance

The Americas remained the strongest region, with reported revenue rising 9% and organic sales increasing 7%. U.S. revenue grew 5%. Europe posted 4% reported growth, although organic revenue slipped 1% due to the timing impact of last year's distribution center transition.

Asia continued to outperform, with reported revenue increasing 10% and organic sales rising 12%. Beyond Yoga revenue grew 16%.

Direct-To-Consumer And E-Commerce Continue To Expand

Direct-to-consumer revenue rose 11%, led by growth across the U.S., Europe and Asia. E-commerce sales climbed 19%, supported by higher traffic, better conversion rates, increased units per transaction, higher average unit retail and lower promotional activity. Wholesale revenue increased 5%.

Shareholder Returns Remain A Priority

Levi Strauss also highlighted its shareholder returns. The company launched a $200 million accelerated share repurchase program in the first quarter, which is expected to finish in the third quarter. It had $240 million remaining under its broader repurchase authorization as of May 31. The board also raised the quarterly dividend 14% year over year to 16 cents per share.

Levi Strauss Raises Full-Year Guidance

Looking ahead, Levi Strauss lifted its fiscal 2026 adjusted EPS forecast to $1.46-$1.52 from $1.42-$1.48. The updated range brackets the analyst consensus estimate of $1.50.

The company also raised its fiscal 2026 revenue outlook to $6.722 billion-$6.753 billion from $6.628 billion-$6.690 billion, above the consensus estimate of $6.696 billion. It now expects organic revenue growth of 5.5%-6.0%, up from its previous forecast of 4.5%-5.5%.

For the third quarter, Levi Strauss expects revenue growth of 4%-5% and adjusted earnings of 34-36 cents per share. The company also plans to open 50-60 new stores this year, with most openings scheduled for the second half.

Levi Strauss reiterated its long-term targets of reaching $10 billion in annual revenue and a 15% operating margin.

Levi Strauss Stock Reaction

LEVI Price Action: Levi Strauss shares were down 6.03% at $22.90 during premarket trading on Thursday, according to market data.