Levi Strauss & Co: Buy American Jeans. I Am.

June 2, 2022

Some of you may remember the article Warren Buffett published in October of 2008 in the midst of credit market crisis “Buy American. I am”.

Such long-term and balanced perspective is always a healthy ingredient worth adding to the toxic cocktail of stock market story of volatility, emotions, sentiment, and short-term perspective.

Recently we wrote about Kontoor Brands, a 2019 spin-off from VF Corporation. Kontoor is a global lifestyle apparel company with a portfolio led by two of the world’s most iconic consumer brands, Wrangler, and Lee.

On April 6th, 2022, Levi Strauss & Co reported first quarter 2022 results. According to report, financial results exceeded expectations, company reaffirmed its annual guidance.

Chip Bergh, president and chief executive officer of the company said: “We started the year with strong consumer demand and solid momentum across geographies, channels and categories”.

For fiscal 2022, company provided guidance of 11%-13% percent net revenue growth.

On June 1st, 2022, company introduced plan to accelerate growth, profitability, and capital returns to shareholders. You can read about this plan here.

Levi Strauss & Co is more than 150 years old company, has been private for 34 years and then returned to public equity markets through IPO in March 2019.

In addition to strategic growth plan, company also announced new $750 million share buyback authorization.

Levi Strauss is currently valued at an EV/EBITDA multiple of x8.7 (LTM Adj EBITDA). Using our valuation assumptions and applying an EV/EBITDA valuation of multiple of x12 we believe that shares of Levi Strauss could be valued at $39.2 per share in three years.

This would provide an upside of 105% or approximately 35% percent annual return.

We therefore believe that recent announcement of growth plans, share buyback authorization and favorable first quarter results – all this means that Levi Strauss story is not over yet.