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Bull of the Day: Levi Strauss & Co. (LEVI)

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Founded in 1873 in San Francisco, Levi Strauss & Co. (LEVI - Free Report) is a retail company known around the world for its iconic Levi’s denim brand; Dockers, Denizen, and Signature by Levi Strauss & Co. are also under the company’s umbrella. LEVI first went public back in 1971, but had been a private company up until its market return last year.

Q3 Earnings Recap

Last week, Levi’s reported much-better-than-expected third quarter results, and shares surged as much as 14% the day after its earnings release.

Strong e-commerce growth helped propel the retailer last quarter, and led to adjusted free cash flow of $183 million. Digital revenue made up almost 25% of total sales, double what it was in Q3 2019.

Levi’s e-commerce performance also helped to offset substantial declines in revenue and net income.

Gross margin also improved to 54.3% thanks to price increases and a bigger portion of total sales coming from its direct-to-consumer channel, which has a higher margin.

Like many retailers, LEVI is still dealing with the impacts on its business from the coronavirus pandemic.

But, management is positive about the near-term future, saying in the earnings press release that "trends appear to be improving sequentially, and at a faster pace than previously expected." 

CEO Chip Bergh also commented that inventories were well-positioned going into the critical holiday season, and he’s "cautiously optimistic that we're not going to have to go down the rabbit hole on promotions…which I think is good for brand health." 

LEVI Breaks Out


Levi Strauss  Co. Price and Consensus


Since March 23, shares of Levi Strauss have climbed about 50%. Estimates have been rising too, and LEVI is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, four analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from a loss of $0.24 to $0.17 per share. Earnings are expected to decline compared to the prior year period, but 2021 looks like it could be a rebound year for earnings growth; earnings should see triple-digit year-over-year growth next year.

LEVI looks to be strongly bouncing back from the Covid-19 lows. Management expects its e-commerce division to turn a profit this year, and beyond 2021, more than half of its business is projected to come from direct-to-consumer.

Additionally, Levi’s just launched an online secondhand store, reselling some of their classic vintage styles. This could be big for the company, especially as more and more consumers are prioritizing environmental sustainability.

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep LEVI on your shortlist.

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