Levi's Q1 To See EPS Growth, Revenue Dip, And Tariff Edge, Says Analyst

Core Viewpoint - Telsey Advisory Group analyst Dana Telsey maintains an Outperform rating on Levi Strauss & Co with a price forecast of $23.00, anticipating a slight increase in EPS for Q1 FY2025 [1] Financial Performance - Levi Strauss is expected to report Q1 FY2025 EPS of$0.28, an increase from $0.26 last year, aligning with consensus estimates [1] - Revenue for Q1 FY2025 is projected to decline by 1.3$1.537 billion, slightly below the consensus estimate of $1.542 billion [2] - For FY2025, reported revenue is expected to decline by 1$6.355 billion in FY2024, while organic revenue is projected to grow by 3.5%-4.5% [3] Margins and Profitability - Gross margin is estimated to improve by 180 basis points to 60.0%, slightly exceeding the 59.9% consensus [2] - Operating margin is expected to reach 10.4%, up from 9.0% last year, in line with consensus projections [2] - Levi's EBIT margin projections indicate potential upside, despite conservative revenue and EPS forecasts due to foreign exchange headwinds [6] Strategic Initiatives - The company is streamlining operations by exiting non-core businesses, including Denizen and European footwear, and preparing to sell Dockers to enhance profitability and reduce revenue volatility [7] - Levi expects tariffs to provide a competitive advantage, with less than 1% of imports coming from China, down from historical levels of 15%-16% [4] Market Position - The company rebounded in Q4 FY2024 with strong revenue growth after previous misses, achieving record gross margins without increased promotions [5] - Levi is well-positioned long-term, benefiting from a stabilizing U.S. denim market, growing direct-to-consumer sales, and product innovation [6]