The denim maker’s direct-to-consumer sales were unexpectedly weak, and profits and margins were propped up by the trade reimbursements.

Thanks in part to a concerted marketing effort, Levi’s DTC sales are already recovering since the Q3 slump — which coincided with the brand’s first net revenue miss in two years, per Wells Fargo.

The need for marketing is one reason why DTC margins often don’t reach the level of wholesale margins, research shows. With wholesale, retail partners take on much of the expense and effort of marketing.

Distribution costs in the U.S. also remain higher than expected, Chief Financial Officer Harmit Singh said during a call with analysts Wednesday.

The tariff refunds are therefore coming at an opportune time for the denim giant. In Q3, the company took in about $80 million in refunds, which was almost all of what it expects, he said.

Levi’s is plowing roughly three-quarters of that back into the business to fund “incremental marketing to drive demand, enhanced supply chain capabilities to improve competitiveness over time and sharper value for consumers during key holiday promotional moments,” he added. About $25 million was spent during Q3 and about $35 million is slated for Q4.

Other challenges also buffeted Levi’s in the quarter. Traffic and demand for the back-to-school season were weaker than expected, in part because the brand over-emphasized loose fits at a time when U.S. consumers turned to low-rise ones, CEO Michelle Gass said.

“The good news is the team got after it very quickly, and we sharpened our focus,” she said, adding that loose styles do remain “an important business” and “big volume driver.”

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