Levi Strauss (LEVI) Stock Forecast & Price Target

The positive outlook for Levi Strauss & Co. is underscored by a significant gross margin expansion of 350 basis points to 61.3%, surpassing forecasts due to reduced product costs and a favorable sales mix. Additionally, the company's organic sales rose by 8% year-over-year, with notable performance in the Dockers brand and the tops category, which collectively reflect effective strategies to stimulate growth. Furthermore, sales in Europe experienced a solid increase of 14.5%, enhancing overall regional performance and positioning Levi Strauss for continued growth in the future.

The analysis highlights several fundamental issues contributing to a negative outlook on Levi Strauss's stock. Firstly, the company's adjusted SG&A expenses have increased significantly, deleveraging by 220 basis points year-over-year to 47.8% of sales, which exceeded expectations and indicates rising operational costs. Additionally, the forecast for FY25 reflects a decline in earnings per share, with estimates revised down to $1.24 from $1.42, and management's conservative revenue guidance suggests ongoing challenges due to foreign exchange headwinds and sector-specific difficulties, particularly in Asia where the operating margin contracted substantially.