By Sabrina Escobar

Levi Strauss's revenue rose by double digits from a year earlier as the jeans maker delivered what it called a strong fourth quarter. But analysts were trimming their targets for the stock price after management said unfavorable exchange rates would weigh on its sales.

For the quarter ended Dec. 1, Levi's revenue rose 12% from a year earlier to $1.8 billion, while the consensus call among analysts surveyed by FactSet was for $1.7 billion. Adjusted earnings were 50 cents a share, compared with the 48 cents analysts expected.

"We delivered a strong fourth quarter and holiday season, positioning us well as we enter 2025," said CEO Michelle Gass in a statement Wednesday afternoon.

Still, shares were 1.9% lower Thursday morning. The S&P 500 was largely flat.

Levi's said net revenue would be between 1% and 2% lower than in 2024, while analysts had projected it would be flat. The company cited several factors, including unfavorable foreign exchange rates; the decision to exit Denizen, its lower-cost jeans business; and the extra week in 2024. Levi's said exchange-rate fluctuations alone will bring revenue growth down by 2.5 percentage points this year.

Adjusted earnings per share will range from $1.20 to $1.25, below calls for $1.29 a share. Exchange rates and a higher tax rate will reduce earnings by about 20 cents, Levi's predicts.

The current strength of the U.S. currency is hurting a range of companies because revenue denominated in yen or euros, for example, converts to fewer dollars.

"Overall, it was a very strong qtr on the top-line, but SG&A and guidance took away from the impressive topline results," wrote Citi analyst Paul Lejuez in a note Thursday. He rates the stock Neutral with a $19 price target.

The average target for the stock Thursday morning was $21.23, according to FactSet, compared with the $22.50 recorded at the end of November.

Guggenheim analyst Robert Drbul cut his target to $20 from $23, citing Levi Strauss's less optimistic growth estimates. Dana Telsey, CEO of Telsey Advisory Group, cut her price target to $23 from $26, also reflecting the new guidance.

That said, both Drbul and Telsey maintained Buy ratings on the shares. Drbul noted that the company notched its 11th straight quarter of comparable-store sales growth in its direct-to-consumer business.

"We believe the organic health of Levi's business (despite near-term macro and FX pressures) is getting better overall as the company sees strong DTC results, improving wholesale trends, and increased denim demand," he wrote in a note Thursday.

Telsey agreed, describing the fourth-quarter revenue growth as impressive.

"Encouragingly, the revenue outperformance was not promotionally driven as gross margin also exceeded expectations, reaching a record level for the quarter," she wrote Thursday. "Looking ahead, LEVI appears to be taking a conservative outlook for FY25 with revenue and EPS guide coming in below the market's expectations with FX creating a meaningful headwind."

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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January 30, 2025 11:29 ET (16:29 GMT)

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