A slowdown in denim demand could cause problems for Levi Strauss, says Citi
Weaker demand for denim products could be a major headwind for Levi Strauss stock in the near term, according to Citigroup. Analyst Paul Lejuez downgraded the denim maker to neutral from a buy rating, citing comments from other management teams that indicated a slowdown in denim trends, which began during the back-to-school season and continued into the holidays. “While LEVI is a strong brand with good global prospects over the long term, in the short to medium term we expect a challenging US backdrop characterized by weaker denim trends to pressure results,” he wrote in a statement on Wednesday to customers and found that Levi Strauss generates 60% to 65% of its sales from denim. Even after plummeting 38% in 2022 and underperforming Citi’s broader coverage group over the past 12 months, Lejuez said Levi stock still doesn’t look cheap. As a result, he lowered Citi’s price target to $17 from $19, suggesting shares will only stay close to Tuesday’s close. He also thinks consensus earnings estimates for 2023 are too high, lowering his estimate to $1.20 per share from $1.29, compared to a Wall Street consensus of $1.39. “LEVI’s ability to scale back promotions and raise prices is likely to fade in F23 as the denim category faces a broad slowdown,” Lejuez wrote, adding that he expects management to be cautious about the outlook for 2023 shares. Shares fell about 2% earlier the market opened. – CNBC’s Michael Bloom contributed to the coverage
https://www.cnbc.com/2023/01/11/a-slowdown-in-denim-demand-could-trouble-levi-strauss-citi-says.html A slowdown in denim demand could cause problems for Levi Strauss, says Citi
