LEVI STRAUSS & COLEVI
LEVI STRAUSS & CO Income Taxes Disclosure
INCOME TAXES
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The Company's income tax expense was $132.0 million, $7.2 million and $15.7 million and the Company's effective income tax rate was 20.8%, 3.3% and 5.9% for the years ended November 30, 2025, December 1, 2024 and November 26, 2023, respectively.
The increase in the effective tax rate in fiscal year 2025 was primarily driven by the prior year tax benefits from an international intellectual property transaction, a $10.1 million tax benefit related to favorable resolutions of state audits and a lower earnings before taxes base that magnified the impact of these discrete items. During 2024, the Company completed an intercompany sale of intellectual property between entities based in different tax jurisdictions resulting in net tax benefits of $46.4 million.
The decrease in the effective tax rate in fiscal year 2024 as compared to fiscal year 2023 was primarily driven by an international intellectual property transaction which benefited fiscal year 2024, partially offset by the reduced FDII benefit in fiscal year 2024.
The Company's income tax expense (benefit) differed from the amount computed by applying the U.S. federal statutory income tax rate to income before income taxes as follows:
| Year Ended | ||||||||||||||||||||||||||
| November 30, 2025 | December 1, 2024 | November 26, 2023 | ||||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||
| Income tax expense (benefit) at U.S. federal statutory rate | $ | 133.1 | 21.0 | % | $ | 45.7 | 21.0 | % | $ | 55.7 | 21.0 | % | ||||||||||||||
| State income taxes, net of U.S. federal impact | 3.0 | 0.5 | % | (4.3) | (1.9) | % | 1.3 | 0.5 | % | |||||||||||||||||
Change in valuation allowance | — | — | % | (0.5) | (0.2) | % | (2.0) | (0.8) | % | |||||||||||||||||
Impact of foreign operations, net(1) | 19.6 | 3.1 | % | 25.8 | 11.8 | % | 14.3 | 5.4 | % | |||||||||||||||||
| Foreign-derived intangible income benefit ("FDII") | (25.1) | (4.0) | % | (6.5) | (3.0) | % | (55.9) | (21.0) | % | |||||||||||||||||
Reassessment of tax liabilities | (1.0) | (0.2) | % | (11.0) | (5.1) | % | (0.6) | (0.2) | % | |||||||||||||||||
International intellectual property transaction | — | — | % | (45.9) | (21.1) | % | — | — | % | |||||||||||||||||
| Stock-based compensation | 7.5 | 1.2 | % | 3.7 | 1.7 | % | 6.6 | 2.5 | % | |||||||||||||||||
| Other, including non-deductible expenses | (5.1) | (0.8) | % | 0.2 | 0.1 | % | (3.7) | (1.5) | % | |||||||||||||||||
| Total | $ | 132.0 | 20.8 | % | $ | 7.2 | 3.3 | % | $ | 15.7 | 5.9 | % | ||||||||||||||
(1)Included in Impact of foreign operations, net are foreign rate differential, Global Intangible Low-Taxed Income ("GILTI") and the tax impact of actual and deemed repatriations of foreign earnings net of foreign tax credits.
Impact of foreign operations. The tax expense in fiscal year 2025 decreased as compared to fiscal year 2024 primarily due to a lower valuation allowance against foreign tax credits and U.S. tax cost from GILTI.
Foreign-derived intangible income benefit. A higher benefit in fiscal year 2025 as compared to fiscal year 2024 is due to a larger amount of royalty income eligible for the FDII deduction in the current year.
The U.S. and foreign components of income from continuing operations before income taxes were as follows:
| Year Ended | |||||||||||||||||
| November 30, 2025 | December 1, 2024 | November 26, 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Domestic | $ | 125.5 | $ | (117.8) | $ | (164.7) | |||||||||||
| Foreign | 508.5 | 335.4 | 431.0 | ||||||||||||||
| Total income before income taxes | $ | 634.0 | $ | 217.6 | $ | 266.3 | |||||||||||
Income tax expense (benefit) consisted of the following:
| Year Ended | |||||||||||||||||
| November 30, 2025 | December 1, 2024 | November 26, 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| U.S. Federal | |||||||||||||||||
| Current | $ | 30.2 | $ | 13.3 | $ | 14.4 | |||||||||||
| Deferred | (23.1) | 4.7 | (91.5) | ||||||||||||||
| $ | 7.1 | $ | 18.0 | $ | (77.1) | ||||||||||||
| U.S. State | |||||||||||||||||
| Current | $ | 13.4 | $ | 1.2 | $ | 11.3 | |||||||||||
| Deferred | (10.4) | (14.9) | (9.7) | ||||||||||||||
| $ | 3.0 | $ | (13.7) | $ | 1.6 | ||||||||||||
| Foreign | |||||||||||||||||
| Current | $ | 109.0 | $ | 83.8 | $ | 94.2 | |||||||||||
| Deferred | 12.9 | (80.9) | (3.0) | ||||||||||||||
| $ | 121.9 | $ | 2.9 | $ | 91.2 | ||||||||||||
| Consolidated | |||||||||||||||||
| Current | $ | 152.6 | $ | 98.3 | $ | 119.9 | |||||||||||
| Deferred | (20.6) | (91.1) | (104.2) | ||||||||||||||
| Total income tax expense | $ | 132.0 | $ | 7.2 | $ | 15.7 | |||||||||||
Deferred Tax Assets and Liabilities
The Company's deferred tax assets and deferred tax liabilities were as follows:
| November 30, 2025 | December 1, 2024 | ||||||||||
| (Dollars in millions) | |||||||||||
| Deferred tax assets | |||||||||||
| Foreign tax credit carryforwards | $ | 20.4 | $ | 26.1 | |||||||
| State net operating loss carryforwards | 13.8 | 15.7 | |||||||||
| Foreign net operating loss carryforwards | 24.7 | 32.8 | |||||||||
| Employee compensation and benefit plans | 91.2 | 87.5 | |||||||||
| Advance royalties | 211.0 | 158.8 | |||||||||
Prepaid services | 34.5 | 46.5 | |||||||||
| Accrued liabilities | 32.4 | 35.9 | |||||||||
| Sales returns and allowances | 44.6 | 39.0 | |||||||||
| Inventory | 29.7 | 32.7 | |||||||||
Intangibles | 268.6 | 275.1 | |||||||||
Property, plant and equipment (1) | 86.8 | 61.0 | |||||||||
| Lease liability | 328.6 | 288.7 | |||||||||
Other (1) | 33.5 | 36.6 | |||||||||
| Total gross deferred tax assets | 1,219.8 | 1,136.4 | |||||||||
| Less: Valuation allowance | (48.2) | (52.9) | |||||||||
| Deferred tax assets, net of valuation allowance | 1,171.6 | 1,083.5 | |||||||||
| Deferred tax liabilities | |||||||||||
| U.S. Branches | (56.7) | (40.1) | |||||||||
| Right of use asset | (301.6) | (259.4) | |||||||||
| Total deferred tax liabilities | (358.3) | (299.5) | |||||||||
| Total net deferred tax assets | $ | 813.3 | $ | 784.0 | |||||||
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(1)Fiscal year 2024 amounts have been conformed to the fiscal year 2025 presentation.
Foreign tax credit carryforwards. The foreign tax credit carryforwards at November 30, 2025, are subject to expiration through 2035 if not utilized.
Net operating loss carryforwards. As of November 30, 2025, the Company had state net operating loss carryforwards of $226.8 million and foreign net operating loss carryforwards of $131.3 million. Of the state net operating losses, $205.0 million are subject to expiration through 2045, and the remaining $21.8 million are available as indefinite carryforwards under applicable tax laws. Of the foreign net operating losses, $39.5 million are subject to expiration through 2032 and the remaining $91.8 million are available as indefinite carryforwards under applicable tax laws.
Valuation Allowance. The following table details the changes in valuation allowance during the year ended November 30, 2025:
Valuation Allowance at December 1, 2024 | Changes in Related Gross Deferred Tax Asset | Change / (Release) | Valuation Allowance at November 30, 2025 | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Foreign tax credit and U.S. state net operating loss carryforwards | $ | 20.9 | $ | (0.6) | $ | — | $ | 20.3 | |||||||||||||||
Foreign net operating loss carryforwards and other foreign deferred tax assets | 32.0 | (4.1) | — | 27.9 | |||||||||||||||||||
| $ | 52.9 | $ | (4.7) | $ | — | $ | 48.2 | ||||||||||||||||
Unremitted earnings of certain foreign subsidiaries. The Company historically provided for U.S. income taxes on the undistributed earnings of foreign subsidiaries unless they were considered indefinitely reinvested outside the United States. The Company reevaluated its historical indefinite reinvestment assertion as a result of the enactment of the Tax Cuts and Jobs Act, (the "Tax Act" enacted on December 22, 2017) and determined that any historical undistributed earnings through November 25, 2018 of foreign subsidiaries, as well as most of the additional undistributed earnings generated through November 30, 2025, are no longer considered to be indefinitely reinvested. The deferred tax liability related to foreign and state tax costs associated with the future remittance of these undistributed earnings of foreign subsidiaries was $10.8 million (included in Other deferred tax assets and liabilities). For the year ended November 30, 2025, management asserted indefinite reinvestment on a portion of foreign earnings generated in fiscal years 2019 to 2025. If such earnings were to be distributed to the U.S., the related foreign withholding and state tax costs would be approximately $10.6 million.
Uncertain Income Tax Positions
As of November 30, 2025, the Company’s total gross amount of unrecognized tax benefits was $47.2 million, of which $46.4 million could impact the effective tax rate, if recognized, as compared to December 1, 2024, when the Company’s total gross amount of unrecognized tax benefits was $42.7 million, of which $41.4 million could have impacted the effective tax rate, if recognized.
The following table reflects the changes to the Company's unrecognized tax benefits:
| November 30, 2025 | December 1, 2024 | November 26, 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Unrecognized tax benefits beginning balance | $ | 42.7 | $ | 42.3 | $ | 38.1 | |||||||||||
| Increases related to current year tax positions | 1.4 | 4.2 | 4.1 | ||||||||||||||
| Increases related to tax positions from prior years | 9.6 | 0.7 | 1.9 | ||||||||||||||
| Decreases related to tax positions from prior years | (3.6) | (3.6) | — | ||||||||||||||
| Settlement with tax authorities | (2.9) | (0.7) | (1.7) | ||||||||||||||
| Lapses of statutes of limitation | — | — | (0.2) | ||||||||||||||
| Other, including foreign currency translation | — | (0.2) | 0.1 | ||||||||||||||
| Unrecognized tax benefits ending balance | $ | 47.2 | $ | 42.7 | $ | 42.3 | |||||||||||
The Company evaluates all domestic and foreign audit issues and believes that it is reasonably possible that total gross unrecognized tax benefits will not significantly change within the next 12 months.
As of November 30, 2025 and December 1, 2024, accrued interest and penalties primarily relating to non-U.S. jurisdictions were not material.
The Company files income tax returns in the United States and in various foreign (including Belgium, Hong Kong, India, Mexico and Canada), state and local jurisdictions. With few exceptions, examinations have been completed by tax authorities or the statute of limitations has expired for United States federal, foreign, state and local income tax returns filed by the Company for years through 2014.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jan 28, 2026 | Showing above |
| 2024 | Jan 29, 2025 | |
| 2023 | Jan 25, 2024 | |
| 2020 | Jan 27, 2021 | |
| 2019 | Jan 30, 2020 | |
| 2018 | Feb 5, 2019 | |
| 2017 | Feb 7, 2018 | |
| 2016 | Feb 9, 2017 | |
| 2015 | Feb 11, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.