Fed’s Powell opens door to potential rate cuts at Jackson Hole
On Tuesday, Stifel analysts revised their price target for Levi Strauss & Co. (NYSE:LEVI) shares, reducing it to $20.00 from the previous $25.00, while still upholding a Buy rating on the stock. The adjustment follows Levi Strauss's announcement of an increase in organic revenue growth to 8.6% year-over-year, compared to 8.2% in the previous quarter. Additionally, the company reported an adjusted earnings per share (EPS) of $0.38, surpassing Stifel's estimate of $0.27, attributed to effective execution of its brand-building strategy. The company maintains impressive gross profit margins of 60%, with InvestingPro data showing strong cash flows sufficient to cover interest payments.
Despite these positive indicators, concerns have been raised about the potential effects of reciprocal tariffs, which are not accounted for in the company's reaffirmed guidance. Stifel notes that Levi Strauss's diverse global revenue and supply chain, which includes sourcing from 20 different countries, could provide a structural advantage in mitigating the impact of tariffs compared to its peers.
However, the firm acknowledges that Levi Strauss is not immune to cost shocks or a slowdown in consumer spending. Stifel estimates that the tariffs could result in a high-single-digit percentage decrease in calendar year 2026 earnings power, assuming no change in consumer demand. If consumer demand were to decrease by a mid-single-digit percentage, the impact on 2026 earnings could be even more significant.
Stifel's revised $20 price target is based on a 17.4 times price-to-earnings (P/E) ratio on the company's projected inflationary scenario earnings of $1.15 for calendar year 2026. In a potential recessionary scenario with earnings of $0.72, the valuation would be at 27.6 times P/E. The firm's assessment takes into account these downside risks while balancing them against the current valuation. For a deeper understanding of LEVI's valuation metrics and 12 additional exclusive ProTips, visit InvestingPro, where you'll find comprehensive analysis and real-time financial insights.
In other recent news, Levi Strauss & Co. reported strong financial results for the first quarter of fiscal year 2025, surpassing earnings per share (EPS) expectations. The company achieved an EPS of $0.38, exceeding the projected $0.28, marking a 35.71% surprise. However, revenue slightly missed forecasts, coming in at $1.53 billion, just below the anticipated $1.54 billion. The company's direct-to-consumer sales grew by 12%, contributing significantly to the overall 9% year-over-year revenue increase. Record gross margins were reported at 62.1%, up from 58.2% in the previous year.
In terms of company strategy, Levi Strauss is focusing on its direct-to-consumer channels, which now account for 52% of total revenues. The wholesale segment also experienced growth, with a 5% increase. Meanwhile, the company is monitoring potential impacts from recent tariff announcements, with plans to mitigate any adverse effects. Despite these challenges, Levi Strauss maintains its full-year outlook, with expectations of continued revenue and margin growth.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.