Levi Strauss & Co. (LEVI), a ~$5B market cap denim and apparel company, is in the midst of a strategic transformation to become a DTC-first lifestyle brand. The company aims to double revenue to $10B with 15% operating margins. Shares remain down ~25% since returning to public markets in 2019.

Following its 2022 Investor Day, LEVI has shifted focus to brand strength and direct-to-consumer (DTC) growth. Management has since exited underperforming brands including Dockers, Denizen, and a small footwear line, impacting short-term financials.

Despite near-term volatility, LEVI maintains strong fundamentals:

• FY24 Revenue: $6.36B (+2.9% YoY)
• Gross Margin: ~60%, a record, driven by improved mix, cost reductions, and strong full-price sales
• Adjusted EBIT Margin: ~10.2%
• DTC Growth: +14% Q4, +11% FY; e-commerce up 14%
• Wholesale Revenue: +3% YoY
• FY25 Guidance: Revenue ~$6.29B (-1% to -2% reported, +3.5% to +4.5% organic)
• FY25 Gross Margin: 61.0%–61.2% (+100bps YoY)
• FY25 EBIT Margin: 10.9%–11.1%

Operational initiatives under “Project Fuel” are improving efficiency, stabilizing SG&A, and enhancing long-term profitability. International growth is accelerating, particularly in India, Japan, and Turkey. 

Levi’s remains the #1 women’s denim brand in the U.S., generating nearly $2B annually in that segment. The company maintains an attractive dividend yield of 2.8%–3.2%.

Valuation is below historical and peer averages:

• Forward P/E: ~13–14x FY25 EPS (vs. ~16.6x historical, ~15.1x peers)
• DCF model suggests >75% upside

Risks include global tariffs, macroeconomic headwinds, and near-term revenue pressure from business exits and FX. Given sector volatility and ongoing transformation, LEVI remains on the “Moat” watchlist. Re-evaluation is planned after further DTC traction and as CEO Michelle Gass completes her second year.

DCF Attached here: link