Levi’s likely to miss Q1 earnings expectations, UBS says

UBS is forecasting a disappointing earnings report from Levi Strauss Co. (NYSE:LEVI) when it posts Q1 results next Thursday.

Equity analyst Jay Sole noted that his EPS forecast for the report is two cents below the analyst consensus. Additionally, top line figures could come up short of estimates as consumers pull back on spending, in his view.

“Diversified product mix beyond denim and China reopening will help drive sales but this will be offset by slowdown in US and EMEA consumers,” Sole told clients. “We expect operating margin to remain under pressure as elevated promotions persist and the company invests in more marketing. We believe LEVI will adjust other expenses to accommodate increased advertising spend.”

That said, he believes the company will be able to maintain its full-year guidance and thus mute downside pressure post-print. Sole noted that the options market is pricing in a nearly 6% move on earnings day, but doubts this will come to fruition.

Sole also maintained a long-term Buy rating on the stock, noting upside beyond perhaps some near-term choppiness. He assigned a $21 price target to the stock and reiterated a Buy rating.

“We think LEVI is well positioned to capture global denim market share as it has high brand awareness across its most relevant markets,” Sole concluded. “Beyond FY23E, we believe the company's international sales will likely boost consolidated growth with an annual average pace of 9%, while the US delivers 3%.”

Read more on the company’s Q4 earnings results.