Shares of Levi Strauss (LEVI) are trading lower in Friday’s pre-market trading session after the clothing manufacturer delivered lackluster third-quarter earnings coupled with an unoptimistic full-year outlook.
The company saw weakened consumer spending for the quarter which led to a 1% drop in sales to $1.51 billion. This fell short of the Wall Street expectation of $1.54 billion. However, the company’s adjusted earnings came in at 28 cents per share to beat the earnings of 27 cents per share.
Profitability was hit as well as a result of the pullback in demand – gross margins fell 1.3% to 55.6%. This came about as Levi attempted to stir demand and move excess inventory through deep promotions. The company also pointed to an abnormally hot summer as a roadblock for the quarter.
While the third quarter was a challenge, it’s not expected to get better for the remainder of the year. Levi Strauss trimmed its full-year outlook accordingly. While the company was originally anticipating sales growth between 1.5%-2.5%, the new target is a modest 1% growth. And, profits will fall at the lower end of the previously given $1.10-$1.20 forecast.
CEO Chip Bergh did his best to keep things positive, citing impressive growth in the DTC segment which can be attributed to strong comp-store gains. Despite the suboptimal environment, Levi Strauss is committed to controlling what it can and remains confident about meeting its long-term goals.
That being said, shares are down 2.12% in pre-market trading Friday morning as a result of this news. The stock has fallen more than 6.5% in the last month.
So, where does this leave current investors? Should you stick around and wait for LEVI to turn things around or is this your sign to get out while you can?
We’ll help you make your decision with confidence and clarity through the VectorVest stock forecasting software. Here are 3 things you need to know…
LEVI Has Poor Upside Potential, Safety, and Timing
The VectorVest system helps you save time and stress while empowering you to win more trades. You’re given all the insights you need in 3 simple ratings: Relative value (RV), relative safety (RS), and relative timing (RT).
Each sits on its own scale of 0.00-2.00 with 1.00 being the average. You’re given a clear buy, sell, or hold recommendation based on the overall VST rating for a stock eliminating any guesswork or emotion from your strategy. As for LEVI, here’s what you need to know:
- Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential to AAA corporate bond rates and risk. This offers far superior insights than a simple comparison of price to value alone. The RV rating of 0.81 is poor for LEVI, and the stock is slightly overvalued with a current value of $10.39.
- Poor Safety: The RS rating speaks to a stock’s risk profile. It comes from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. Right now, the RS rating of 0.64 is poor for LEVI.
- Poor Timing: The RT rating speaks to the direction, dynamics, and magnitude of a stock’s price trend. It’s taken day over day, week over week, quarter over quarter, and year over year. And as you can see from the stock’s recent performance, the timing is poor for LEVI - with an RT rating of 0.80.
The overall VST rating of 0.75 is poor for LEVI - but is it bad enough to justify selling? Not quite. VectorVest recommends holding this stock for the time being. Stay up to date through the VectorVest system. Get a free stock analysis today!
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VectorVest advocates buying safe, undervalued stocks, rising in price. LEVI shares fell in Friday’s trading session after a lackluster quarter that saw a drop in sales and profits coupled with a cut to the full-year forecast. The stock has poor upside potential, safety, and timing.
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