Levi Strauss Q3 preview: Where next for Levi shares?

Josh Warner
By :  ,  Former Market Analyst

When will Levi Strauss release Q3 results?

Levi Strauss is scheduled to publish third quarter earnings on the afternoon of Wednesday October 6.


Levi Strauss Q3 earnings preview: what to expect from the results

Investors are cautiously optimistic ahead of Levi’s third quarter results. The company, renowned for its famous denim jeans, breezed past expectations in the last quarter and said revenue was recovering faster than anticipated in most of its markets.

Its topline bounced back in the second quarter from the pandemic-induced lows seen the year before, driven by the reopening of Levi stores, a recovery in wholesale income as other retailers started to welcome customers back, and continued momentum online. Meanwhile, gross margins hit new record highs as sales from its higher-margin Direct-to-Consumer channel more than doubled and because of fewer promotions and more full price sales.

With that in mind, markets are expecting Levi Strauss to have kept up the momentum in the third quarter. Wall Street is expecting Levi Strauss to report revenue of $1.47 billion, which would mark a 39% rise from the $1.06 billion booked the year before when sales were still being hampered by lockdown restrictions. Notably, the company said it expected third quarter revenue to surpass the $1.44 billion delivered in the third quarter of 2019, before the pandemic hit.

Adjusted diluted EPS – its key profit measure – is forecast by analysts to jump to $0.37 from just $0.08 last year. Notably, Levi Strauss has managed to beat earnings expectations for at least eight consecutive quarters, according to data from Refinitiv.

However, investors will be wary considering the well-reported supply chain issues hitting several industries, including clothing firms. There have been reports that firms such as Gap and Nike have suffered production issues overseas as the Delta variant hampers output in places like Vietnam, and some firms that enjoyed a flurry of traffic when stores reopened earlier this year have started to see footfall hit again amid a resurgence in the Delta variant.

The fact Levi Strauss is currently boasting record margins means it has a good cushion that can afford to take a hit, but the main concern will be about its ability to meet demand – especially as it enters the key holiday season.

That threatens Levi’s guidance that it raised when it released its second quarter earnings. The company is aiming to grow second half revenue by 28% to 29% from the year before which, if achieved, would see its topline come in 4% to 5% above pre-pandemic levels. It is also aiming to grow adjusted EPS to $1.29 to $1.33 over the full year from the $0.21 booked the year before. Reiterating this guidance in the current climate would be a win considering the impact the challenging environment is having on the wider industry.

Levi shares more than halved in value when the pandemic hit in February 2020 but has bounced back strongly over the last 18 months, with the stock now trading 27% above pre-pandemic levels. Still, the 13 brokers covering Levi Strauss are extremely bullish on the company’s prospects with a Buy rating and an average target price of $34.94, implying there is over 38% potential upside from the current share price.


Where next for the Levi Strauss share price?

The Levi Strauss share price has been trending lower since mid-July. It trades below its descending trendline from this date and below its 50 sma on the daily chart. 

The price found support at $24 and has attempted a move high, although still closed below the 200 sma. 

Any recovery would need to see a close above the 200 sma at $25 and above the falling trendline at $26. It would take a move above the 50 sma at $26.50 for the bulls to really gain traction.  

Failure to retake the 200 sma could see the price fall lower again to $24. A break below here could open the door to $22.50 the March low.  

Where next for the Levi share price?

How to trade Levi Strauss shares

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  1. Open a City Index account, or log-in if you’re already a customer.
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