Levi Strauss To Report Q1 Earnings Next Week, Analyst Sees Gross Margin Growth, Stabilizing Wholesale Business

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on Levi Strauss & Co LEVI, raising the price target to $22 from $18.

The company will report the first quarter of 2024 (ended February) results on Wednesday, April 3, after the market close.

For the quarter, the analyst maintains estimates and continues looking for earnings per share of $0.20, lower than $0.34 last year.

While near-term macro challenges remain, the company announced a new two-year initiative to help deliver profitable growth, including $100 million in cost savings in FY24.

On the top line, the analyst projects net revenues to decline 9.3% year over year to $1.532 billion.

Telsey’s forecast assumes a 15% decline in the Americas, a 10% decline in Europe, a 5% increase in Asia, and a 2% decline in the Other Brands segment.

However, according to the analyst, the company is well positioned with a strong and growing DTC business complemented by a stabilizing wholesale business that can deliver growth against easier compares going forward.

Below the top line, the analyst estimates 150 bps of gross margin expansion year over year to 57.3%.

Telsey forecasts an operating margin of 7.5%, down 350 bps year over year.

Given the higher sales and cost savings from its Project FUEL, the company guided to improve its EBIT margin in the second half, Telsey added.

Price Action: LEVI shares are trading higher by 2.52% to $19.27 on the last check Wednesday.

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