Up 20% This Year, Is Levi Strauss Worth a Look?

Core Viewpoint - Levi Strauss reported better-than-expected earnings, raising its guidance for the year, leading to an 11% increase in stock price and over 20% year-to-date gains. The question remains whether there is still value in the stock after this run [1]. Financial Performance - Sales increased by 5% in the Americas and 14% in Europe, with a 12% increase for Beyond Yoga, while Asia saw a 1% decline. Operating margins improved to 7.5% from 1.5% year-over-year [1]. - Net revenues rose by 6% on a reported basis and 9% on an organic basis compared to the previous year. Stockholders' equity increased to $2.09 billion from $1.97 billion [3]. - Total net income reached $67 million, significantly up from $18 million last year, with diluted earnings per share improving to $0.17 from $0.04 [4]. Updated Guidance - Full-year net revenue growth is now expected to be between 1% and 2%, an improvement from a previous forecast of a decline of 1% to 2%. Organic revenue growth is projected to be between 4.5% and 5.5% [5]. - Gross margins are expected to expand by 80 basis points, down from a previous estimate of up to 100 basis points, primarily due to tariff impacts [5]. - Adjusted diluted earnings per share are anticipated to increase by $0.05 to $1.25, compared to prior guidance of $1.20, resulting in a forward P/E ratio of approximately 16 times full-year earnings, which is below the historical average of 38.11 [6][7]. Tariff Impact - The company plans to absorb as much of the tariffs as possible, estimating a potential impact of $25 million to $30 million in 2025, translating to $0.02 to $0.03 per share [8]. - The uncertainty surrounding tariffs, particularly from sourcing countries like Pakistan and Bangladesh, poses a risk to future sales figures [7][8]. Investment Outlook - The stock is viewed as a "hold" or "sell" for current investors, with gains already realized. New investors are advised to monitor for pullbacks rather than chase the recent performance [8][9].