Needham started off coverage on Levi Strauss & Co. (NYSE:LEVI) with a Buy rating on its view that it is a compelling momentum story. Analyst Tom Nikic and his team believe the apparel giant is executing well on its ...

Core Insights - Levi Strauss & Co. (LS&Co.) aims to achieve net-zero greenhouse gas emissions by 2050 through the launch of the LS&Co. Energy Accelerator Program (LEAP) to enhance access to renewable electricity in its supply chain, starting in India [1][5] Group 1: Program Details - LEAP is developed in partnership with Schneider Electric, focusing on energy management and automation [2] - The program will provide manufacturing suppliers in India with competitive pricing, terms, and return on investment for renewable energy procurement [3] - Suppliers participating in LEAP can explore options for on-site solar installations or join multi-buyer cohorts for power purchase agreements (PPAs) [4] Group 2: Strategic Importance - The initiative is positioned to increase awareness and technical capacity among Indian suppliers regarding renewable electricity [5] - The program aligns with India's goals for a greener future, showcasing how global brands can empower their supply chains to adopt renewable energy [5]

Sustainability Commitment - Levi Strauss & Co. (LS&Co.) is enhancing its sustainability efforts through targeted actions in key impact areas, as outlined in its 2024 Sustainability Goals and Metrics Report [1] - The report highlights progress in waste reduction, circularity, responsible cotton sourcing, and chemical management [1] Waste Management - LS&Co. is pursuing TRUE Zero Waste certifications for its company-operated facilities, with the Henderson, Nevada distribution center achieving TRUE Silver certification and a 95.2% waste diversion rate in 2023 [2] - The Northampton Distribution Center in the U.K. has also achieved TRUE Certification, diverting 90.8% of waste from landfills during the same period [2] - The company aims for zero waste to landfill from its facilities and a 50% waste diversion rate across strategic suppliers by 2030, with key suppliers diverting 77% of waste from landfills in 2024, a 1% increase from the previous year [3] Cotton Sourcing - In 2024, LS&Co. sourced over 80,000 metric tonnes of cotton, which constitutes nearly 90% of the raw materials used annually for its products [4] - The company acknowledges that climate change poses risks to cotton supply and production, despite some short-term benefits suggested by climate modeling [5] - To mitigate these risks, LS&Co. participates in the U.S. Cotton Trust Protocol and supports initiatives like the Better Cotton Initiative and the Organic Cotton Accelerator [6] Supply Chain Resilience - LS&Co.'s suppliers purchase cotton globally and ensure redundancy in the supply chain to minimize risks from disruptions caused by weather and climate-related issues [7] - The company’s supply chain is designed to be resilient, with any associated cost increases expected to be absorbed into regular business activities and considered in financial planning [7]

Summary of Levi Strauss & Co. FY Conference Call (September 16, 2025) Industry Overview - The denim category is valued at approximately $100 billion and is expected to grow in the mid-single digits moving forward [3][4] - The casual environment has significantly contributed to the growth of denim [3] Company Insights - Levi Strauss & Co. has been a market leader for 170 years and is focused on expanding the denim category [3] - The company has launched various denim styles, including a looser baggy fit, which currently represents about 15% of their product mix, while skinny and slim fits contribute 20% [4] - The company aims to become a $10 billion entity with a 15% operating margin over the next 12 to 18 months [6] Product Development and Marketing - The introduction of the Blue Tab premium category, inspired by Japanese denim, has been successful in both Asia and the U.S. [4][5] - Collaborations with influencers, such as Beyoncé, have positively impacted brand visibility and sales [5][6] - The company is expanding its Western wear offerings, which have seen increased demand [9][10] Direct-to-Consumer (DTC) Strategy - DTC now accounts for 50% of the company's business, up from 20% when the current leadership joined [12] - The company has experienced 13 consecutive quarters of positive comparable sales [16] - E-commerce has grown from 4% of total business pre-COVID to approximately 12% recently, with a target of reaching 15% [29] Financial Performance and Goals - Gross margin improved from less than 58% in 2023 to over 61% in 2024, driven by higher full-price sales and growth in DTC and international markets [38] - EBIT margins have increased from 9% to mid-11% over the past three years [39] - The company is focused on maintaining SG&A control to drive EBIT leverage [39] Operational Efficiency - The company is transitioning to a hybrid distribution model to improve efficiency and reduce costs [33][34] - Distribution expenses have increased due to e-commerce growth and inefficiencies in older distribution centers [31][32] - The company is working on eliminating unproductive SKUs to make room for new product innovations [24] Future Outlook - The company is confident in achieving its 15% margin target by sustaining mid-single-digit growth and improving gross margins [39] - There is a clear path to reaching $10 billion in revenue, with ongoing discussions about timelines and strategies [42] Additional Considerations - The company is navigating challenges related to tariffs and inflation, which have impacted consumer demand [41] - The leadership is committed to long-term growth and has established a clear path for achieving ambitious targets [42]

Core Insights - Levi Strauss & Co. will have Harmit Singh, the chief financial and growth officer, participate in a fireside chat at the Wells Fargo 8th Annual Consumer Conference on September 16, 2025 [1] - The event is scheduled for 10:15 a.m. Pacific time and will be available via live webcast on the Company's Investor Relations website [1] - A replay of the webcast will be accessible after the live event at the same location [1]

Core Insights - United Colors of Benetton is experiencing significant leadership changes in India, with the CEO, commercial director, and marketing head departing the company [1][2][3] - The company is undergoing a global restructuring plan aimed at reducing losses and closing stores due to increased competition and sluggish demand [3][4] - Despite a revenue decline of 6.6% to ₹874.06 crore in FY24, Benetton India reported a substantial profit increase to ₹90.36 crore from ₹9.94 crore in the previous fiscal year [6][7] Leadership Changes - Ramprasad Sridharan, the CEO and managing director, is leaving to pursue new opportunities, while Kaveri Nag, head of marketing, has already exited [2] - Nikhil Upadhye, the commercial director, left in March to join Ola Electric [2] - More departures are expected within the sales and online commerce teams as part of the restructuring [3] Financial Performance - The company faced challenges in 2023 due to the end of post-pandemic recovery, geopolitical tensions, inflation, and currency volatility [4] - A new business plan for 2024-2029 has been prepared to guide the company's economic recovery [4] - Cost reductions, particularly in material costs, have led to improved profit margins despite declining revenues [7] Market Position and Strategy - Benetton has a strong presence in India with over 300 exclusive stores and online sales [6] - The company remains committed to the Indian market, viewing it as a priority for growth despite recent challenges [11] - The global restructuring has led to concerns about future investments in India, with employees expressing uncertainty [9][8] Competitive Landscape - The retail environment is becoming increasingly competitive, with established retailers and homegrown brands intensifying competition [13] - Other retailers, such as Levi Strauss & Co. and Arvind Fashions, have also seen top management changes in the past year, indicating a broader trend in the industry [14]

Core Insights - The company has implemented several strategic changes over the past few years, which have driven significant momentum in its operations [1] - The focus on transformation is expected to continue as a key driver looking ahead to 2026 [2] Financial Performance and Outlook - The company is currently in a quiet period and will not discuss financial performance or current trends until the upcoming earnings report in October [1] - Previous earnings were reported in mid-July, with the next quarterly report scheduled for October [1]

Financial Data and Key Metrics Changes - The company aims for $10 billion in revenue with operating margins of 15% as part of its strategic vision [6] - Gross margins have improved from 57% three years ago to over 62% currently, indicating strong brand momentum [59][60] - Direct-to-consumer (DTC) sales have increased from 40% to 50% of total sales over the past few years, contributing to higher operating margins [11][22] Business Line Data and Key Metrics Changes - The company has exited low-margin businesses such as Denizen and Dockers to focus on Levi's and Beyond Yoga, which are expected to drive growth [7][8] - The tops business has seen a 16% increase in sales, indicating strong performance in this category [26] - Non-denim products now account for 40% of the business and are growing, with new offerings like performance tech and denim skirts [18] Market Data and Key Metrics Changes - The global denim market is valued at approximately $100 billion and is expected to grow in the mid-single-digit range [15] - The company has experienced resilience in consumer spending, particularly among consumers earning over $100,000 [43] - International markets, especially Europe and Asia, have shown strong growth, contributing to overall performance [44] Company Strategy and Development Direction - The company is transitioning to a DTC-first strategy while maintaining a significant wholesale presence [6][22] - There is a focus on becoming a denim lifestyle brand, expanding offerings beyond traditional denim products [12][19] - The company plans to open 50 to 60 new stores annually over the next five years, aiming to increase its global footprint [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth despite potential macroeconomic challenges, citing strong product offerings and marketing strategies [46] - The second half of the year is expected to be more modest due to stronger comparisons from the previous year and tariff impacts [44] - The company is optimistic about its ability to navigate tariff challenges and maintain market share through effective pricing strategies [50][54] Other Important Information - The partnership with Beyoncé has been successful, contributing to brand momentum, and future marketing efforts will focus on sports events [36][40] - The company has launched a loyalty program with over 40 million consumers, aiming to expand its customer base significantly [48] - Inventory levels are healthy, with a mid-teen percentage increase driven by preparations for the second half of the year [56][57] Q&A Session Summary Question: What has driven the most momentum in the business? - Management highlighted the transformation towards a higher growth and margin profile, focusing on DTC and exiting low-margin businesses [6][7] Question: How does the company view the denim cycle and its impact? - The denim category is large and growing, with casualization trends driving demand, although the company is diversifying its offerings [15][19] Question: What is the outlook for the wholesale environment? - Wholesale growth is expected to be modest, with opportunities in underpenetrated areas like women's and tops [32][33] Question: How is the company navigating potential anti-American sentiment? - Management reported no significant anti-American sentiment affecting the brand, emphasizing strong local relationships [47][48] Question: What are the expectations regarding tariffs? - The company anticipates manageable tariff impacts and is working on strategies to mitigate these costs [50][51] Question: What is the outlook for inventory growth? - Inventory was up mid-teens in Q2, primarily due to tariff preparations, but is considered healthy overall [56][57] Question: How does the company plan to leverage SG&A costs? - Management is focused on improving EBIT margins and leveraging fixed costs as the business grows [62][65]

Financial Data and Key Metrics Changes - The company aims for $10 billion in revenue and 15% operating margins, with a strategic vision focused on higher growth and margins [6][40] - Direct-to-consumer (DTC) sales have increased from 40% to 50% of total sales over the past few years, with operating margins up by 2 to 2.5 points [11][12] - Gross margins have improved from 57% to over 62% in three years, indicating strong brand momentum [60] Business Line Data and Key Metrics Changes - The company has exited low-margin businesses like Denizen and Dockers to focus on Levi's and Beyond Yoga, which are expected to drive growth [7][8] - The tops business has seen a 16% increase in sales, indicating strong performance in this category [27] - Non-denim products now account for 40% of the business and are growing, with new offerings like performance tech and denim skirts [18][19] Market Data and Key Metrics Changes - The global denim market is valued at approximately $100 billion and is expected to grow in the mid-single digits [15] - The company has seen resilience in its consumer base, particularly among those earning over $100,000, with strong growth in Europe and Asia [42][43] Company Strategy and Development Direction - The company is transitioning to a DTC-first strategy while maintaining wholesale as a complementary channel [22][29] - There is a focus on becoming a denim lifestyle brand, expanding offerings beyond traditional denim products [12][18] - The company plans to open 50 to 60 new stores annually over the next five years, targeting underpenetrated markets like women's apparel [23][24] Management's Comments on Operating Environment and Future Outlook - Management expresses confidence in sustaining growth despite potential macroeconomic challenges, citing strong product offerings and marketing strategies [45] - The second half of the year is expected to be more modest due to pricing adjustments and a stronger comparison to the previous year [43] - The company is actively managing tariff impacts and believes it can mitigate most of the additional costs through vendor negotiations and SKU rationalization [50][51] Other Important Information - The company has launched a successful partnership with Beyoncé, which has contributed to brand momentum [35][36] - The loyalty program has over 40 million consumers, with plans to expand this base significantly [47] Q&A Session Summary Question: What are the key drivers of momentum for the company? - Management highlighted the transformation towards a higher growth and margin profile, focusing on DTC and exiting low-margin businesses [6][7] Question: How does the company view the current denim cycle? - The denim category is large and growing, with the company benefiting from a casualization trend and expanding its product offerings [15][18] Question: What is the outlook for the wholesale environment? - Wholesale is expected to grow modestly, with recent quarters showing mid to high single-digit growth [31][32] Question: How does the company plan to sustain growth after the Beyoncé partnership? - Management is focused on leveraging upcoming events like the Super Bowl and World Cup to maintain brand momentum [39] Question: What is the health of the Levi consumer today? - The consumer base is described as resilient, particularly among higher-income demographics, with strong growth in international markets [42][43] Question: How is the company addressing tariff impacts? - The company is confident in mitigating tariff impacts through pricing strategies and vendor negotiations [50][51] Question: What are the expectations for inventory growth? - Inventory was up mid-teens in Q2, primarily due to preparations for the second half and is considered healthy overall [56][57] Question: What are the levers for future gross margin expansion? - Future growth in women's business, SKU rationalization, and higher full-price sales are expected to drive gross margin improvements [60][61]

Retail Sector Overview - The retail sector has demonstrated significant resilience despite rising prices and inflation, with retail sales increasing by 0.5% in July after a 0.9% rise in June, and a year-over-year increase of 3.9% [1][3] - The growth in July was primarily driven by a 1.6% increase in motor vehicle sales at auto dealerships, following a 1.4% rise in the previous month [3] Online and Specific Retail Sales - Online sales rose by 0.8% in July, building on a 0.9% increase in June, while clothing stores and furniture outlets saw sales increases of 0.7% and 1.4%, respectively [4] - Households are reportedly spending less and saving more due to concerns over a weak labor market and potential inflation from tariffs [4] Impact of Tariffs and Federal Reserve Policy - Tariffs imposed by the Trump administration have contributed to rising prices, which in turn have influenced retail sales positively, potentially leading the Federal Reserve to maintain interest rates at 4.25-4.5% for an extended period [5] - Despite a hawkish stance, some Federal Reserve officials have indicated plans for two 25-basis-point rate cuts before year-end, with markets pricing in an 83.1% chance of a cut in September, which would benefit the retail sector and the economy overall [6] Selected Retail Stocks - Four retail stocks are highlighted for investment: Levi Strauss & Co. (LEVI), Walmart, Inc. (WMT), Dutch Bros Inc. (BROS), and Wayfair Inc. (W), all of which have seen positive earnings estimate revisions in the past 60 days and carry favorable Zacks Ranks [2][10] Levi Strauss & Co. - Levi Strauss & Co. has an expected earnings growth rate of 4% for the current year, with a Zacks Consensus Estimate improvement of 5.7% over the past 60 days, and holds a Zacks Rank 1 [8] Walmart - Walmart's expected earnings growth rate for the current year is also 4%, with a 0.4% improvement in the Zacks Consensus Estimate over the past 60 days, and it holds a Zacks Rank 2 [11] Dutch Bros Inc. - Dutch Bros Inc. is projected to have a 34.7% earnings growth rate next year, with an 8.2% improvement in the current-year earnings estimate over the past 60 days, and carries a Zacks Rank 2 [12] Wayfair Inc. - Wayfair Inc. is expected to see earnings growth of over 100% for the current year, with the Zacks Consensus Estimate improving by more than 100% in the past 60 days, and holds a Zacks Rank 2 [14]