Levi Strauss & Co. walked into Wednesday's earnings call with a number that looked great on paper: adjusted profit of 48 cents a share, blowing past Wall Street's 36-cent forecast. Investors took one look under the hood and sold the stock anyway.

The jean maker's third-quarter filing with the SEC shows why the "beat" came with an asterisk. Of that 48-cent figure, roughly 11 cents net came from a one-time U.S. tariff refund tied to the IEEPA import duties the company has been fighting — not from selling more jeans. Strip that out, and underlying profit growth was a far more modest 9% year over year.

Revenue told a similar story. Levi's brought in $1.61 billion for the quarter, up 4% from a year ago but roughly $10 million short of what analysts were modeling, according to an earnings-call transcript of Wednesday's session. The company's own direct-to-consumer business — its stores and website, the part of the business it has spent years trying to build up — grew only 2%, with comparable sales essentially flat.

CEO points to warm weather and the wrong jeans

CEO Michelle Gass didn't dodge it on the call. "DTC performance in the quarter fell short of our expectations," she said, blaming soft U.S. back-to-school traffic, a marketing push that didn't land, and warmer-than-usual weather in Europe that kept shoppers out of stores. She said the company is now leaning harder into one specific trend: demand for low-rise fits, which it says it under-stocked.

"DISTRIBUTION COSTS WERE HIGHER THAN WE EXPECTED THIS QUARTER."

That's CFO Harmit Singh, pointing to a roughly 5-cents-a-share hit from extra spending the company chose to make to chase growth rather than bank the tariff windfall as pure profit.

Wall Street's verdict was immediate. Shares fell nearly 5% during Wednesday's regular session to $19.51, then kept sliding in after-hours trading to roughly $19.21 — about 6% below where the stock closed Tuesday, per an analysis of the results. That leaves the stock well off its 52-week high near $25.70.

Management still nudged its full-year profit target higher — adjusted earnings per share of $1.54 to $1.56, up from $1.46 to $1.52 — largely because the tariff refund flows through the rest of the year too. But it quietly trimmed full-year reported revenue growth guidance to about 7%, down from a prior range of 7% to 7.5%, citing a stronger dollar. The board also approved an extra $100 million in accelerated stock buybacks, a move companies often use to cushion a stock price after a rough reaction.

The quarter also marked the end of an era in the finance department: Harmit Singh, CFO for 14 years, is retiring, with John Vandemore named as his successor. Singh used his last earnings call to argue the reinvestment was the right call, saying it "strengthens our competitive position, supports near-term growth, and keeps us on track."

For a company that has spent the Trump administration's tariff fight arguing it could absorb the costs, Wednesday's reaction was a reminder that investors are drawing a sharp line between a genuine sales rebound and a refund check from the government.