Levi Strauss & Co (NYSE:LEVI) shares surged more than 11% in early trade on Friday as the apparel company’s second quarter earnings topped Wall Street expectations.
Revenue for the quarter was up 6% year-over-year to $1.4 billion, ahead of the consensus estimate of $1.37 billion.
Direct-to-consumer (DTC) revenue was up 11%, while wholesale revenues grew 3% from the same period last year.
Earnings per share (EPS) of $0.22 were up from $0.16 in the year-ago quarter and exceeded the Street consensus of $0.13.
Following a strong first half, the company has raised its full-year revenue and EPS guidance, chief financial officer Harmit Singh said.
The company now expects revenue growth in the range of 1% to 2%, compared to its earlier guidance of -1% to -2%, and EPS is guided in the range of $1.25 to $1.30, compared to the previous $1.20 to $1.25.
“The continued inflection of our financial performance is a direct result of our laser focus on the core Levi’s brand and our DTC-first strategy,” Singh said.
“We are fundamentally becoming a company with a higher growth rate, higher margin profile, stronger cash flows and higher returns on invested capital.”
Price target boosted
Bank of America analysts remain bullish on Levi’s following its Q2 beat, highlighting that they call the early stages of a multi-quarter earnings upgrade cycle.
“We reiterate our ‘Buy.’ We think Levi’s is still in the early innings of a positive EPS revision cycle and see a combination of mid single-digit sales growth and margin expansion ahead,” the analysts wrote in a note, raising their price objective from $21 to $24.
The firm highlighted Levi’s back-to-back quarters of high-single-digit organic sales growth as a key indicator of momentum.
“We are encouraged by the two consecutive quarters of high single-digit organic sales growth, trending ahead of most apparel peers,” they wrote.
The analysts added that Levi’s updated full-year organic sales outlook of 4.5% to 5.5% may still prove conservative given trends in the wholesale segment.
Though management cited tariffs as a drag on second-half margins, cutting 40 basis points from H2 guidance, the analysts believe Levi’s is navigating the environment well.
“The tariff environment remains fluid, but we think Levi’s is relatively well-positioned given strong brand heat, high international sales exposure, and a diversified sourcing mix,” they wrote.
Looking past tariffs, Bank of America sees room for continued gross margin upside. “We are encouraged by structural gross margin drivers including mix (DTC, women's, international), lower product costs, higher full-price selling, and FX,” they wrote.
The firm raised its fiscal year 2025 EPS estimate to $1.30 and sees potential for further beats “as long as the tariff environment doesn't materially worsen from here.”
Shares of Levi’s added 11.3% at about $22 shortly after US markets opened on Friday.