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

·3 min read

Founded in 1873 in San Francisco, Levi Strauss & Co. LEVI 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 a couple of years ago.

Q2 Earnings Recap

Shares of Levi Strauss popped after reporting better-than-expected second-quarter results earlier this month.

Revenue soared 156% year-over-year to 41.28 billion, with growth driven by strength across the U.S. and China. Its wholesale channel’s net sales increased 167% and its direct-to-consumer segment rose 141%, while Levi’s e-commerce business grew 42% compared to the prior-year period.

Adjusted earnings per share of $0.23 beat the Street consensus estimate of $0.09 per share and strongly rebounded from the adjusted net loss of $0.48 it recorded in Q2 2020.

Operating cash flow rocketed 500% higher for the first half of 2021 to $248 million, and the retailer now has $1.22 billion in cash and cash equivalentson hand. Additionally, Levi raised its quarterly dividend to $0.08 per share, which yields about 0.91% on an annual basis.

LEVI Breaks Out

Levi Strauss & Co. Price and Consensus
Levi Strauss & Co. Price and Consensus

Shares have surged recently, up about 36% year-to-date compared to the S&P 500’s gain of 15.1%. 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 $0.23 to $1.34 per share. Earnings are expected to grow about 538% compared to the prior year period, and 2022 should generate even more profits as well.

Looking ahead, Levi Strauss expects good things to continue for the rest of the year. Sales are expected to jump between 28% to 29% for the H2 2021, representing growth of 4% to 5% compared to the second half of fiscal 2019. "Revenues in most markets are recovering faster than anticipated," CFO Harmit Singh said, "and we are emerging from the pandemic with sustainable and improved structural economics."

Additionally, only 8% of Levi’s stores are closed due to pandemic restrictions, as the recovery of demand continues to be strong in all of its geographic regions.

All in all, the denim retailer has bounced back nicely from Covid-19’s hit to its business, and investors should expect more growth and potentially higher share price.

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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