Telsey Advisory Group analyst Dana Telsey reiterated the Outperform rating on Levi Strauss & Co
Telsey writes that Levi Strauss is well-positioned due to a stabilizing U.S. denim market and a more streamlined business after exiting Denizen and footwear.
Strong DTC trends and an accelerating women's denim segment are positive signs. The company is also enhancing its product assortment with a focus on new items. Additionally, Project Fuel is expected to deliver $50 million in cost savings in the fourth quarter, leading to more efficient operations.
The analyst noted that the company's third-quarter results mirrored the second quarter, with sales slightly below market expectations (but in line with guidance) and expenses also aligning with the forecast.
The EPS upside was attributed to significantly stronger gross margins.
All three geographies reported constant currency growth for the first time since the first quarter of 2023, with DTC accelerating to double-digit growth from high-single digits in the first half, while wholesale remained down in the mid-single digits, the analyst writes.
Due to challenges in China, Mexico wholesale, and the Dockers business, the company slightly adjusted its full-year 2024 topline outlook, while guiding EPS to the midpoint of its previous range, slightly below consensus estimates.
However, challenges persist in the near term, but Telsey remains optimistic about the firm's ongoing strength.
The company is exploring strategic options for the Dockers brand, which shows management's focus on core areas, the analyst highlights.
Price Action: LEVI shares are trading higher by 1.21% to $19.68 at last check Friday.
