LEVI: Strong Top-Line Fuels 2Q Upside, But High Bar Not Hurdled; Remain OW w/ $25 PT

Research evidence excerpt

LEVI: Strong Top-Line Fuels 2Q Upside, But High Bar Not Hurdled; Remain OW w/ $25 PT

Levi Strauss & Co. Equity Research

Investment Thesis

Key themes surrounding this name include the following:

1. Denim Trend Continues: The Denim category continues to gain momentum and is estimated

to be midway through the next multi-year cycle driven by a shift in silhouette (tight to baggy),

western trending and casualization. Further fueling the trends, denim has been one of the top

beneficiaries from a size-led wardrobe replacement driven by GLP-1 weight loss products which

gained material penetration across the US in recent years. As the market share leader and a

fashion forward business, LEVI is in a unique opportunity to capitalize on growing trends. To that

end, management has expressed confidence that LEVI will continue to outpace the category and

continue to take share. According to Euromonitor data, LEVI retained its #1 share position in 2025

and took an additional +40bps of share in NA.

2. Shifting Channel, Geographic & Category Mix Bolstering Top Line & Margins: LEVI has spent

the past several years focused on increasing penetration of the structurally higher DTC channel

and overseas markets. The company has aspirations of hitting ~60% penetration for both over

the next 3-5 years (from just ~45% international and ~50% DTC today). At the same time, LEVI

is pivoting its assortment to under-penetrated and structurally higher GM categories—such as

women's and tops, both of which have and will likely continue to outpace the growth of men's and

bottoms.

3. Focus on Expenses: While top-line visibility has been strong, flow-through has been an issue over

the past several years for LEVI, with SG&A growing to 50.3% in FY25, marking a +500bps increase

since FY21.