Wells Fargo's analyst Ike Boruchow noted that while Levi Strauss has exceeded earnings expectations and raised forecasts for the first half of 2026, underlying issues are causing concern. Specifically, the company's second-quarter revenue plan beat expectations by approximately 300 basis points, but margins did not show improvement, remaining at 9.0% against a planned range of 8-9%.
Additionally, the guidance for the third quarter was about 100 basis points below market expectations, and the fourth-quarter margin outlook appears overly optimistic. Boruchow highlighted that the company is facing execution risks, particularly with the upcoming retirement of CFO Harmit Singh in November.
Despite the downgrade, which reflects a more balanced risk/reward scenario, the long-term outlook for Levi remains positive, with the price target maintained at $25, suggesting a potential 2% decline from recent closing prices. Following the downgrade, Levi's shares fell over 2%.
Notably, the majority of analysts covering Levi remain bullish, with 14 out of 16 rating it a buy or strong buy, indicating that the market sentiment is still largely favorable despite Wells Fargo's cautious stance