Fed’s Powell opens door to potential rate cuts at Jackson Hole
On Wednesday, UBS reaffirmed its confidence in Levi Strauss & Co. (NYSE:LEVI), maintaining a Buy rating and a $20.00 price target for the company’s shares. The endorsement follows Levi’s recent strategy update which includes the divestiture of the Dockers brand. UBS sees this move as a positive step towards strengthening Levi’s growth and profitability.
According to UBS, Levi’s transition from a primarily North American, wholesale-focused men’s denim company to a global, multi-channel lifestyle brand for both genders is expected to continue driving market share gains in the long term. The company already demonstrates strong fundamentals with impressive gross margins of 60.8% and healthy revenue of $6.4 billion in the last twelve months. The sale of Dockers is anticipated to enhance Levi’s organic revenue growth and margins, as it will contribute to a reduction in costs and a decrease in the company’s reliance on U.S. wholesale operations.
The divestiture also aims to streamline Levi’s business operations, allowing for a concentrated investment in the core Levi’s brand and the Beyond Yoga business. InvestingPro data reveals strong financial health metrics, with liquid assets exceeding short-term obligations and sufficient cash flows to cover interest payments. Additionally, the transaction is set to provide Levi with the opportunity for incremental share buybacks, complementing its track record of raising dividends for six consecutive years.
UBS’s analysis suggests that once Levi demonstrates consistent mid-single-digit percentage revenue growth with robust margins, there will be potential for an expansion in its price-to-earnings ratio. UBS forecasts an approximate 11% compound annual growth rate in earnings per share for Levi from fiscal year 2024 to 2029.
The firm’s outlook reflects a belief in Levi’s strategic initiatives and their capacity to deliver sustained long-term growth and shareholder value.
In other recent news, Levi Strauss & Co. has announced the sale of its Dockers brand to Authentic Brands Group for $311 million, with the potential to increase to $391 million based on future performance. This strategic move is part of Levi’s focus on its direct-to-consumer approach and expanding its international presence. Proceeds from the sale, expected to close around July 31, 2025, will be partially used for a $100 million stock repurchase program. Analysts from Stifel have maintained a Buy rating on Levi, highlighting the positive impact of the sale on the company’s strategy to concentrate on more profitable segments. Stifel projects an incremental earnings per share increase of $0.01 for fiscal year 2025, with an additional $0.02 for fiscal year 2026. Additionally, Levi Strauss & Co. announced an executive transition, with Lisa Stirling moving to Vice President, U.S. and Canada Finance. The company has begun the search for her successor as Global Controller and Principal Accounting Officer. This transition is not related to any disagreements over accounting practices, ensuring stability in Levi’s financial management.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.