Levi Strauss & Co. LEVI has given investors more to consider after its recent rally, including stronger earnings, a higher fiscal 2026 outlook and improving cash generation.
The operating story has improved, but the stock’s valuation, tariff exposure and execution risks make the investment case less straightforward after the move.
LEVI Delivers a Broad Earnings Beat
Levi Strauss reported adjusted earnings of 28 cents per share in the second quarter of fiscal 2026, beating the Zacks Consensus Estimate of 24 cents by 16.7%. The result also increased from 22 cents in the year-ago quarter.
Revenues rose 8% year over year to $1.56 billion and surpassed the consensus mark by 2.5%. Organic revenues advanced 5.7%, reflecting balanced growth across regions, channels and product categories.
Momentum was not concentrated in one area. DTC, wholesale, U.S. and international markets, women’s and men’s products, and tops and bottoms all contributed to the quarter’s performance.
Levi Strauss & Co. Price, Consensus and EPS Surprise
Levi Strauss & Co. price-consensus-eps-surprise-chart | Levi Strauss & Co. Quote
Levi Strauss Raises Its Fiscal Outlook
Management raised fiscal 2026 reported revenue-growth guidance to 7%-7.5%, up from the prior 5.5%-6.5% view. Organic revenue growth is now expected at 5.5%-6%, compared with the earlier 4.5%-5.5% range.
Adjusted earnings per share guidance increased to $1.46-$1.52 from $1.42-$1.48. The updated outlook includes an estimated 4-cent headwind from a higher tax rate.
Levi Strauss also expects an adjusted EBIT margin of 12% for fiscal 2026. The company continues to plan 50-60 net new store openings during the year, with most planned for the second half.
LEVI Supports Returns With Cash Flow
Cash flow strengthens the shareholder-return story. Adjusted free cash flow increased nearly 60% year over year to roughly $231 million, helped by stronger earnings and disciplined inventory management.
Levi Strauss ended the quarter with $849.3 million in cash and cash equivalents and about $1.8 billion in total liquidity. Inventories declined 7% year over year.
The company increased its quarterly dividend 14% to 16 cents per share. It also had about $240 million remaining under its existing share-repurchase authorization.
Levi Strauss Faces a Fuller Valuation
Valuation is the main counterweight after the rally. LEVI shares have risen 17.4% in the past three months and 27.8% over the past year.
The stock trades at 15.45X forward 12-month earnings, above its five-year median of 13.26X and slightly ahead of the Zacks sub-industry’s 14.51X. It remains below the Zacks Retail-Wholesale sector’s 22.09X and the S&P 500’s 20.22X.
The $27 price target, based on 16.38X forward 12-month earnings, supports a balanced view. It suggests that Levi Strauss’ stronger operating progress may already be partly reflected in the shares.
American Eagle Outfitters, Inc. AEO is a relevant apparel comparison because it operates American Eagle and Aerie as youth-focused lifestyle brands. Abercrombie & Fitch Co. ANF also offers a useful comparison as a global omnichannel specialty retailer of apparel and accessories.
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LEVI’s Risk Factors Limit Near-Term Upside
Tariffs and foreign exchange remain pressure points. Tariffs and currency already weighed on second-quarter gross margin, while management’s fiscal 2026 outlook assumes current tariff levels remain in place.
Foreign exchange is expected to create an approximately 70-basis-point gross-margin headwind in the third quarter. Higher taxes and currency are also projected to reduce earnings per share by 2-3 cents.
Expenses are another watch item. Reported SG&A increased to $843 million from $791 million a year earlier, while duplicate distribution costs tied to the U.S. distribution-network transition could persist until consolidation is completed. Expansion into more fashion-sensitive categories also raises execution risk.
LEVI’s Neutral Signal Favors Patience
The bottom line is that Levi Strauss has a stronger fundamental profile, but the stock no longer looks as inexpensive after its rally. Earnings momentum, guidance and cash flow support investor interest, while valuation and cost risks argue against chasing the shares.
The stock currently carries a Zacks Rank #3 (Hold), which aligns with a balanced near-term investment case rather than a clear buying opportunity. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
LEVI has a Value Score of B, a favorable composite style signal that combines value, growth and momentum characteristics.
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Levi Strauss & Co. (LEVI): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).