Stifel Starts Levi Strauss & Co. (LEVI) at Buy
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(Updated - August 2, 2021 9:14 AM EDT)
Stifel analyst Jim Duffy initiates coverage on Levi Strauss & Co. (NYSE: LEVI) with a Buy rating and a price target of $38.00 noting that the company is benefiting from structural shifts that create a credible case for as much as 8% revenue growth and mid-teens TSR. Shifts include:
1) increasing contribution of the higher AUR and margin women’s business (to 35% + in FY21E)
2) a higher mix of DTC (DTC to 39%+ with owned digital to 8%+ of FY21E)
3) increased contribution from International (to a high-forties % of the mix in FY21E)
4) a more digitally competent and healthier wholesale account base (Wholesale digital to 15% + in FY21E)
The analyst comments "we see a credible case for the business to over-achieve vs. objectives communicated pre-COVID for +MSD revenue growth, +HSD EBIT growth, and +LDD TSR. We see better than mid-single digit revenue growth capacity behind +LSD global wholesale growth (led by +LDD growth from digital wholesale) and +LDD DTC growth (20%+ digital, 10%+ retail). Along with margin benefits from mix shift, pricing/higher AUR, and digital analytics competencies, we see 50bps+ annual EBIT margin expansion likely, +LDD or better EBIT growth. Inclusive of dividends, interest expense reduction, and periodic share repurchases total shareholder return of mid-teens plus is a reasonable expectation on a normalized basis."
Shares of Levi Strauss & Co. closed at $27.52 yesterday.
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