Levi Strauss & Co (NYSE: LEVI) is down nearly 10% on Friday even though the clothing company reported better-than-expected profit for its fiscal third quarter.
Is Levi’s stock a buy after today’s sell-off?
But market tends to be forward looking and that’s where the multinational lacked.
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It lowered its guidance for the full financial year that evoked a meaningful sell-off this morning. Still, Hightower’s Stephanie Link continues to recommend investing in Levi’s stock. Speaking with CNBC, she said:
Levi’s is positioned better than its competition. 65% of their business is men and they’re staying non-dressy. At 10 times earnings with a 3.0% yield, already down 36%, great management team too, I like it here.
Link says the weakness was not surprising since the headwinds (strong dollar, slowing consumer demand, supply constraints etc.) were well documented.
Levi’s now forecasts about a 7.0% annualised growth in net revenue this year – nearly half of what it had guided for earlier. It expects full-year earnings to fall between $1.44 a share and $1.49 a share.
It’s commitment to about $10 billion in revenue by 2027, however, remained unchanged.
Notable figures in Levi’s Q3 earnings report
- Adjusted net income printed at $161 million versus the year-ago $197 million
- Per-share earnings (adj) went down year-on-year from 48 cents to 40 cents
- Net sales of $1.50 billion were up only 1.0%, as per the earnings press release
- FactSet consensus was 37 cents of adjusted EPS on $1.60 billion in net sales
- Ended the quarter with inventories up 43% on a year-over-year basis
- Adjusted gross margin stood at 56.9% – down 60 basis points from last year
According to Levi’s, supply constraints resulted in up to $40 million hit to sales in Q3. It blamed currency headwinds and discounting for the hit to margins. Versus its high in May of 2021, the Levi’s stock is now down more than 50%.
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