LEVI STRAUSS & CO (LEVI): what the price assumes

In the published model solve dated 2026-Q2, anchored at $21.29, LEVI STRAUSS & CO (LEVI) is priced for +10.5% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/LEVI

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.6% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is supported by asset-based and relative-multiple and growth-DCF value, while earnings-power lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Relative, Growth Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.3%); the inversion above states its own rate.

Per-Model Detail (n=19)

Solvency

Bullet Takeaways

• Levi Strauss is shifting from a wholesale denim brand to a direct-to-consumer retailer of its own product, with DTC now about 52% of revenue and growing faster than the wholesale half.
• The balance sheet is conservative, net debt around a third of a year of operating income with interest covered comfortably, which gives the brand room to invest in stores and absorb tariff costs.
• Tariffs are the live pressure: gross margin held near 62% despite tariff headwinds, helped by pricing and lower promotions, and the next read is whether tariff rates and consumer demand let the company hit its raised full-year growth outlook.

Bull Case

Levi's balance sheet is the quiet enabler of its transformation, and it is in good shape. Net debt sits at about a third of a year of operating income, with interest covered more than thirteen times and liquid assets near $812 million. That conservative financing is what lets the company invest in its own stores and e-commerce, the higher-margin direct-to-consumer channel, without leaning on debt or starving the brand of capital. A 170-year-old apparel company with this little leverage can fund a channel shift through a soft consumer environment, which is exactly when weaker, more indebted brands have to pull back.

The transformation itself is working. Direct-to-consumer revenue rose 16% as reported to $911.5 million and now makes up about 52% of total revenue, with the company selling more of its product through its own stores and website rather than through wholesale partners who capture part of the margin. Selling directly means Levi keeps the retail markup, owns the customer relationship and data, and controls how the brand is presented. Gross margin held near 62% even against tariff pressure, supported by higher pricing and lower promotional activity, which is the pricing power a strong brand is supposed to have.

Management has a clear long-term frame for where this leads. The company states that its strategies "over the long term will set us up to deliver mid-single digit annual net revenue growth, reaching approximately $9 billion to $10 billion in total company net revenue" while growing profitability faster. It is returning capital along the way, retiring repurchased shares, and the share count is roughly flat. A well-financed iconic brand executing a margin-accretive shift to direct sales, with pricing power intact and a defined growth path, is the durable-compounder version of the apparel bet.

Bear Case

The structural truth a Levi holder has to sit with is that the multiple is pricing growth that the company has not yet consistently delivered. At about 18 times operating income, the price assumes operating profit grows roughly 18% a year for five years, while management's own long-term frame points to mid-single-digit revenue growth reaching $9 billion to $10 billion. There is a gap between what the price needs and what the company guides toward, and the burden is on the margin and the channel mix to close it. The conservative earnings-power methods already say the stock is expensive, sitting well below the price.

The core business is apparel, which is fashion-cyclical and fiercely competitive. Denim demand waxes and wanes with style cycles, and Levi competes against fast-fashion, premium denim specialists, and private-label programs at the same retailers it supplies. The direct-to-consumer shift improves margins but also raises Levi's fixed costs and operating risk: running stores means rent, staff, and inventory exposure that wholesale did not carry. When consumer spending on discretionary apparel softens, a retailer absorbs that more directly than a wholesaler does.

Tariffs are the immediate pressure on the thesis and they are outside Levi's control. Gross margin slipped 20 basis points to 61.9% on tariff headwinds, and the company's guidance assumes specific tariff rates on imports from China and the rest of the world; a change in those rates moves the math in either direction. The bear case is not that Levi is a weak brand; it is that the price already credits a growth and margin path that depends on the channel shift continuing to lift profitability, the consumer staying healthy, and tariffs not eating the gains, three things that have to go right together for an 18-times multiple to be defended.

Valuation

The price is making a moderate growth bet on Levi. At today's quote the shares trade around 18 times company-wide operating income, which inverts to an assumption that operating profit grows roughly 18% a year for five years. That sits above the mid-single-digit revenue growth management frames over the long term, so the price is leaning on the direct-to-consumer shift to lift margins faster than revenue grows, turning modest top-line growth into faster profit growth.

The methods split along the growth question. The relative-multiple lens and the forward-growth methods land near or above the current price, supporting the valuation if the DTC margin story plays out. The earnings-power methods, which capitalize current profit with no growth, sit below the price, which is the conservative read saying the stock is expensive without the growth. The asset-and-profitability methods land modestly below as well. The pattern is a within-range name where the forward methods supply the optimism and the static methods supply the caution; the spread between them is the durability of the margin expansion the channel shift is supposed to deliver.

Solvency is a clean strength and bounds the downside well. Net debt sits at about a third of a year of operating income, with interest covered more than thirteen times and liquid assets near $812 million. The company is not burning cash, and the share count is roughly flat with repurchased shares retired. That financial position is what lets Levi invest in its own retail and absorb tariff costs through a soft consumer patch without distress. The genuine downside variable is not the balance sheet but the combination of tariff rates and discretionary apparel demand; the price assumes both cooperate while the DTC mix keeps lifting margin, and the conservative methods are pricing the risk that they do not.

Catalysts

The first quarter of fiscal 2026 beat expectations and lifted the outlook. Net revenue rose nearly 14% reported, and about 9% organic, to $1.74 billion, with direct-to-consumer revenue up 16% reported to $911.5 million and now roughly 52% of the total. Organic DTC growth was 10% in the United States, 5% in Europe, and 16% in Asia, a broad-based shift toward selling its own product directly.

Margins held up against tariffs. Gross margin was 61.9%, down only 20 basis points despite tariff headwinds, cushioned by higher pricing and lower promotional activity. Management raised full-year fiscal 2026 reported net revenue growth guidance to 5.5% to 6.5% and organic growth to about 4.5% to 5.5%.

The key swing factor is tariffs. The guidance assumes specific U.S. tariff rates on imports from China and the rest of the world, and management noted it does not yet reflect potential tariff rollbacks that could help earnings later in the year. The near-term watch items are the direction of those tariff rates, the durability of DTC growth across regions, and whether gross margin holds near its current level as the channel mix continues to shift toward direct sales.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• CRI (Carter's, Inc.)
• FY2025 10-K: …comfort and fit, quality, pricing, style, selection, convenience, and breadth of distribution. Both national brand and private label manufacturers, as well as specialty apparel brands and retailers, aggressively compete in the baby and young children's apparel market. Our primary competitors include (in alphabetical…
• FY2025 10-K: …recruiting costs, and other related costs. Amounts are reflected within Selling, general, and administrative expenses in our consolidated statement of operations. (4) Related to a non-cash impairment charge on the OshKosh indefinite-lived tradename asset in fiscal 2024. U.S. Retail U.S. Retail segment net sales…
• COLM (COLUMBIA SPORTSWEAR COMPANY)
• FY2025 10-K: …("EMEA"), and Canada. The following tables disaggregate the Company's reportable segment Net sales by product category and channel, which the Company believes provides a meaningful depiction of how the nature, timing and uncertainty of Net sales are affected by economic factors: Year Ended December 31, 2025 (in…
• FY2025 10-K: , especially during periods of heightened economic uncertainty in our key markets. • Highly Competitive Markets. In each of our geographic markets, we face significant competition from global and regional branded apparel, footwear, accessories, and equipment companies. More recently this competition has extended to…
• GIII (G III APPAREL GROUP LTD /DE/)
• FY2025 10-K: …nature of our industry may result in lower prices for our products and decreased gross profit margins. ​ The apparel business is highly competitive. We have numerous competitors with respect to the sale of apparel, footwear and accessories, including digital websites, distributors that import products from abroad and…
• FY2025 10-K: …of the wholesale operations segment. ​ The Company allocates overhead to its business segments on various bases, which include units shipped, space utilization, inventory levels, and relative sales levels, among other factors. The method of allocation has been applied consistently on a year-to-year basis. ​ The total…
• AS (Amer Sports, Inc.)
• FY2025 20-F: …December 31, 2025, compared to the year ended December 31, 2024. Segment Adjusted Operating Profit in our Technical Apparel segment increased by 34.0% for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily driven by higher gross profit, partially offset by an…
• FY2025 20-F: …them exactly where they shop, across digital and physical spaces. We generate revenue from the sale of our products through direct-to-consumer and wholesale channels: • Direct-to-Consumer includes sales of our brands' products through (i) owned e-commerce websites and (ii) owned retail stores, which include elevated…
• UAA (UNDER ARMOUR, INC.)
• FY2025 10-K: …of operations. We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenues and gross profit. The market for performance apparel, footwear and…
• FY2025 10-K: …in innovations around sustainability; and greater economies of scale. In addition, some of our competitors have long-term relationships with our key retail customers that are potentially more important to those customers because of the significantly larger volume and product mix that our competitors sell to them. As…
• LULU (lululemon athletica inc.)
• FY2025 10-K: …our technical product innovation. We also believe our ability to introduce new product innovations, combine function and fashion, and connect through in-store, online, and community experiences sets us apart from our competition. In addition, we believe our vertical retail distribution strategy and community-based…
• FY2025 10-K: …athletic apparel, including large, diversified apparel companies with substantial market share, and established companies expanding their production and marketing of technical athletic apparel, as well as against smaller retailers and those specifically focused on women's athletic apparel. We also face competition…
• GAP (GAP, INC)
• FY2025 10-K: …preferences and practices, including the increasing shift to digital brand engagement, social media communication, and digital shopping; • developing innovative, high-quality products in sizes, colors, and styles that appeal to customers of varying demographics and tastes; • purchasing and stocking merchandise to…
• FY2025 10-K: …transactions and demand for our merchandise are influenced by our marketing efforts. We use various marketing channels to drive customer awareness and consideration of and interest in shopping our brands with the aim of increasing sales, and we are increasingly using digital advertising to drive sales and traffic to…
• ANF (Abercrombie & Fitch Co.)
• FY2025 10-K: …its competition through product, providing high quality and newness; brand voice, amplifying and consolidating brand messaging; and experience, investing in immersive, participatory omnichannel shopping environments. Operating in a highly competitive industry environment can cause the Company to engage in greater…
• FY2025 10-K: …in competition from established companies. These increases in competition could reduce our ability to retain and grow sales, resulting in an adverse impact to our operating results and business. We face a variety of challenges in the highly competitive and constantly evolving retail industry, including: •…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.