Levi Strauss & Co. shares advanced by over 2% on Wednesday following Jefferies decision to begin coverage of the apparel maker with a Buy recommendation. The brokerage framed its stance around what it sees as an improving structural profile for Levis - a business mix shift toward direct-to-consumer sales and higher-value products that it believes will translate into steadier top- and bottom-line growth.
Jefferies projects that Levi can deliver roughly 4% to 5% or greater annual revenue growth over the longer term, coupled with operating margins that could rise toward the 15% area. The firm argues that such a trajectory merits a mid-teens earnings multiple, which would place the stock above its historical average valuation.
On industry dynamics, Jefferies described the current denim cycle - which it dates to about 2021 - as having further room to run. The brokerage highlighted several fashion trends underpinning demand: a tilt to baggier silhouettes, heightened emphasis on comfort, and a wider move toward casual dressing. Jefferies noted that prior denim cycles have extended over multiple years and suggested that Levis broader assortment should provide a buffer if consumer preferences swing back toward dressier apparel or athleisure options.
At the company level, Jefferies emphasized execution of Levis transformation program as a source of potential upside to earnings and valuation over the medium term. A central element of that strategy is the push into direct-to-consumer channels, which now represent about half of Levis sales. Jefferies said this shift gives the company greater control over pricing, inventory management and product innovation.
The brokerage also pointed to category-level developments that support diversification beyond denim. Growth in tops and womens apparel - which together make up a meaningful portion of sales - are helping to broaden Levis product mix. Jefferies called out premiumisation as another policy that should sustain increases in average selling prices.
Across the income statement, Jefferies expects a balanced recovery: revenue gains driven by direct-to-consumer penetration, steady wholesale performance, expansion in gross margins and operating leverage in selling and administrative expense. The firm flagged that volume-led growth will remain important, with additional pricing ability offering incremental upside. Jefferies also anticipates further share repurchases after the first half of 2026.
For the 2026 fiscal year, Jefferies forecasts earnings of $1.50 per share, a forecast it describes as modestly above consensus. The brokerage expects Levi to provide a conservative initial outlook for 2026, and it projects that operating margin expansion will accelerate in 2027 as tariff pressures ease and pricing gains more fully flow through the business.
Jefferies $25 price objective is based on applying a premium to Levis long-term average earnings multiple, a valuation stance the firm attributes to what it views as a more resilient, higher-quality business model following the companys strategic shift.
Separately, an automated stock-screening product referenced in coverage evaluates Levi relative to thousands of companies using a broad set of financial metrics and has highlighted a mix of stock ideas in past periods. That tool is mentioned in the coverage context as part of the broader conversation on investment screening and stock selection.
Author's note: The analysis above summarizes Jefferies published views and the market reaction reported on the trading day in question.