Levi Strauss Stock Spirals on Revenue Miss: What to Know

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Levi Strauss (LEVI) stock is down more than 16% in Thursday's session after the denim giant came up just short of analysts' revenue expectations for its fiscal second quarter.

In the three months ended May 31, Levi said revenue increased 7.8% year-over-year to $1.44 billion, which included an 8.2% rise in its direct-to-consumer (DTC) segment sales to $672.5 million. Its earnings per share (EPS) rose to 16 cents from 4 cents in the year-ago period.

"We delivered another strong quarter driven by the Levi's brand's prominence at the center of culture, a robust pipeline of newness and innovation, and continued momentum in our global direct-to-consumer channel," Levi CEO Michelle Gass said in a statement. "Our amplified focus on women's and denim lifestyle is delivering outsized growth and driving meaningful market share gains."

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The company's results were mixed compared with analysts' expectations. According to CNBC, Wall Street was anticipating revenue of $1.45 billion and earnings of 11 cents per share.

Harmit Singh, chief financial officer at Levi's, attributed the miss to a cautious consumer environment. Speaking to CNBC, the executive said "it's not necessarily an environment where people are buying a lot, people are cautious."

As a result of its performance in the first half of its fiscal year, Levi reaffirmed its full-year outlook, calling for a 1% to 3% rise in revenue and earnings per share to arrive in the range of $1.17 to $1.27.

"Our transformational pivot to operating as a DTC-first company is yielding positive results around the world, giving me great confidence that we will achieve accelerated, profitable growth for the rest of the year and beyond," Gass said.

Levi's earnings report also revealed its board of directors approved an 8% increase to its dividend.

Is Levi stock a buy, sell or hold?

Even with today's post-earnings decline, the consumer discretionary stock is up more than 33% for the year to date. And Wall Street sees even more upside for the shares. According to S&P Global Market Intelligence, the average analyst target price for LEVI stock is $22.78, representing implied upside of roughly 18% to current levels. Additionally, the consensus recommendation is Buy.

Financial service firm Stifel is one of the more bullish outfits on LEVI stock with a Buy rating and $28 price target.

"On the disappointing earnings flow-through in fiscal 2024, we expect shares take a step back," Stifel said in a note following the Wednesday night earnings release. "Ultimately, consumer appetite for the brand is the foundation for future potential upholding our conviction in fiscal 2025-plus earnings potential and opportunity for shares."

Stifel's $28 price target represents implied upside of over 45% to current levels.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.