Citi raises Levi Strauss stock price target to $22 on strong sales growth

Levi Strauss & Co. (LEVI) reported robust Q2 2025 results, significantly exceeding revenue and EPS expectations with $1.4 billion and $0.22 respectively, driven by strong growth in Europe and the US, and a record 62.6% gross margin. The company raised its full-year 2025 EPS guidance to $1.25-$1.30 and organic net revenue growth to 4.5-5.5%, while strategic shifts like expanding its direct-to-consumer business (now over 50% of sales) and the sale of the Dockers brand aim to sharpen focus on the core Levi's brand. Citi subsequently raised its price target to $22, suggesting the updated guidance may still be conservative given the strong performance.

Analysis

Levi Strauss & Co. (LEVI) delivered a robust second-quarter 2025 performance, significantly surpassing market expectations. The company reported revenue of $1.4 billion on 6.5% reported growth, well ahead of the 0.8% consensus estimate, driven by strong performance in its US and European markets. Earnings per share (EPS) came in at $0.22, a 69.23% surprise over the forecasted $0.13. Profitability strengthened considerably, with the company achieving a record gross margin of 62.6%, a 140 basis point year-over-year increase. This financial strength is underpinned by strategic shifts, including the divestiture of the Dockers brand to focus on the core Levi's brand and the successful expansion of its direct-to-consumer (DTC) channel, which now accounts for over 50% of total sales. In response to the strong results, management raised its full-year 2025 EPS guidance to $1.25-$1.30 and its organic net revenue growth forecast to 4.5-5.5%. While Citi raised its price target to $22.00, it maintained a Neutral rating, suggesting the company's guidance may still be conservative with its own EPS estimate at $1.32. The only notable headwind was a 0.8% sales decline in Asia, where management is resetting operations, and a minimal projected EPS impact of $0.02-$0.03 from potential tariffs.

Key Decisions for Investors

• Investors should recognize the strong operational momentum, evidenced by the significant Q2 revenue and EPS beat, record gross margins, and raised full-year guidance, which may still prove conservative according to analyst estimates.
• It is crucial to monitor the progress of the operational reset in the Asian market, as the 0.8% sales decline in the region represents a notable counterpoint to the strength seen in the US and Europe.
• The successful pivot to a direct-to-consumer model, now over 50% of sales, and the strategic divestiture of the Dockers brand warrant a re-evaluation of Levi's long-term margin and growth profile as a more focused apparel entity.
• Despite the positive operational results and price target increase from Citi to $22, investors should consider the accompanying Neutral rating, which may imply that the current stock valuation already reflects much of the recent strong performance.