Levi Strauss' Resilience In The Face Of Sluggish Demand - An Analyst's Perspective On The Outperform Rating

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Levi Strauss & Co LEVI and lowered the price target from $24 to $18.

LEVI reported second quarter FY23 (ended May) adjusted EPS of $0.04 vs. $0.29 last year, one penny above the consensus estimates of $0.03.

The slight upside was driven by a stronger gross margin, as the revenue decline was in-line and SG&A deleverage was greater than expected, said the analyst.

Total revenue declined 9.1% to $1.337 billion, which included the planned shift of $100 million of U.S. wholesale sales out of FQ2 and into FQ1 and a 2% decline in Europe, added the analyst.

The analyst noted that LEVI now anticipates a mid-single digit revenue gain in 2H, moderated from up HSD previously.

The lowered outlook, according to the analyst, is a function of softer U.S. wholesale demand, as Americas are expected to decline low-single-digit for the full year.

Encouragingly, DTC and international remained relative bright spots in 2Q, while U.S. and European wholesale was sluggish, opined the analyst.

Looking ahead, LEVI will be exiting the year in a stronger position, particularly

around input costs and inventory levels and the company is taking steps to drive

additional growth in the U.S., concluded the analyst.

Price Action: LEVI shares are trading lower by 6.32% at $13.33 on the last check Friday.