Shares of Levi Strauss (NYSE:LEVI) tanked 12% in after-hours trading after the retailer reported earnings for its second quarter of Fiscal Year 2024. Adjusted earnings per share came in at $0.16, which beat analysts’ consensus estimate of $0.11 per LEVI share. It’s worth noting that in the past nine quarters, the company has beaten estimates nine times (including today’s results), as per the image below.
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In addition, sales increased 7.5% year-over-year, with revenue hitting $1.44 billion. However, this was lower than the $1.451 billion that analysts were looking for and likely led to the share price’s collapse.
Nevertheless, the company demonstrated operating leverage since its adjusted operating income increased more than its revenue. Indeed, the operating margin expanded from 2.4% to 6% and resulted in a 176% jump from $31.5 million to $87 million. This success seems to be attributed to the company’s shift toward direct-to-consumer (DTC) sales, which come with higher margins. In fact, DTC sales increased by 8% year-over-year and made up 47% of total revenue.
Looking forward, management now expects revenue growth and adjusted earnings per share for FY 2024 to be in the ranges of 1% to 3% and $1.17 to $1.27, respectively. For reference, analysts were expecting 2.7% in revenue growth along with an adjusted EPS of $1.27.
Is LEVI Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on LEVI stock based on six Buys, six Holds, and zero Sells assigned in the past three months. After a 63% rally in its share price over the past year, the average LEVI price target of $22.82 per share implies that shares are fairly valued at current levels. However, it’s worth noting that estimates will likely change following today’s earnings report.
