Levi Strauss & Co.’s shares rose more than 7% on Friday in the premarket after it raised its revenue and profit estimates for full year, driven by strong results from its second quarter and robust demand throughout its retail stores and online channels.
This positive outlook is a sign of Levi’s continued transformation as a lifestyle brand that caters to direct-to consumers (DTC).
Beyond Yoga, a brand of denim clothing for women, has expanded its product range to include denim skirts and dresses as well as athleisure wear.
This has helped the company to attract younger customers and create brand loyalty within a highly competitive retail environment.
The second-quarter earnings beat Wall Street’s expectations in both revenue and profits.
Analysts cited the strong performance of operations and international expansion as two key factors.
Supply chain shifting reduces tariff risk
Levi’s has maintained an optimistic outlook despite the escalating tensions in trade.
Management has updated the forecast to include President Donald Trump’s tariffs of 30% on China, and 10% on other countries.
Levi’s actively seeks to diversify its sources away from China in order to mitigate the negative effects of these factors.
The company is increasing production in Bangladesh and Cambodia, though it acknowledged that its forecast does not factor in Trump’s 35-36% tariffs set to be implemented on imported goods from these nations.
Levi Strauss’ global reach offers some protection: 60% of Levi Strauss revenue is generated outside the US.
The quarter saw an increase of 10% in international revenue, mainly due to Europe. However, US revenues grew by 7%.
Earnings beat expectations, analysts raise their targets
Levi’s performance was praised by analysts.
Telsey Advisory Group’s Dana Telsey praised the firm for its “impressive results” and lauded the company on raising their guidance despite an uncertain tariff environment.
J.P. Morgan increased its Levi Strauss price target to $23 from 18 dollars, maintaining an Overweight Rating.
Matthew Boss, an analyst at Boss Research Group noted that women’s product sales and DTC implementation were strong.
Stifel raised its target from $20 to $24 based on revenue exceeding expectations by $85.6 millions and earnings per shares that beat expectations by $0.09.
Levis’ balanced performance and increasing confidence about its outlook for the second half was highlighted.
Wells Fargo increased its goal to $25, from $22, while maintaining an Overweight Rating.
The company called its tone “prudent”, and noted that demand was strong heading into the fourth and third quarters.
Value and Outlook
According to LSEG, Levi’s shares trade at a 14.92x multiple of earnings. This is a more appealing valuation than Ralph Lauren’s (20.32x) or Abercrombie & Fitch’s (8.46x).
The company is expecting a 3-4% increase in revenue for the third quarter, and it remains cautiously positive about the end of the year despite the uncertainty surrounding tariffs.
Analysts say Levi’s global reach, brand recognition and DTC strength puts it in a good position to capitalize on trends and navigate through challenges.
The following post Levi Strauss share price jumps 7% as analysts raise their target prices; this may change as new information becomes available.
