Levi Strauss (LEVI) is an iconic name in the apparel industry, but it’s a relatively new name in the stock market (public in early 2019) and is positioned to be a key winner in the economic recovery boom, observes Mike Cintolo, editor of Cabot Top Ten Trader.
A lot of that, of course, has to do with macro factors—traffic to its 40 stores and 200-ish outlets has been crippled by the pandemic, so more people heading out should help revenues perk up.
But as we’re seeing with other select retail success stories, Levi is also playing offense, looking to expand as opportunities arise and boosting the digital side of its business.
The Q4 report, released two weeks ago, showed slippage from a year ago but easily beat expectations (earnings of 34 cents per share topped by 10 cents), and some sub-metrics really impressed, with gross margins actually improving and digital revenues up 41% (and making up 26% of revenue), with pure e-commerce making up 10% of revenues (up from 7% a year ago).
Moreover, the top brass has made it known that they’re looking to take advantage of a dreadful commercial real estate market to expand its store base, with digital-heavy stores and small outlets (2,500 square feet).
Analysts keep hiking their outlook, now looking for $1.12 per share of earnings this year (up from an estimate of 98 cents before the recent report) and $1.37 in 2022, both of which should prove conservative.
Technically, LEVI fell from 23 after coming public to below 10 after last year’s crash and was still sitting at 12 in late September when the buyers came in. The advance since then has been excellent, with one rest period (eight weeks in December-January) and a brief dip to the 10-week line three weeks ago.
The post-earnings buying power has been very impressive, taking LEVI to new all-time highs. We suggest aiming for dips, though we’re not expecting a major retreat.
